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3G services bidders are anxious over auction rules, lack of time

3G services bidders are anxious over auction rules, lack of time
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First Published: Wed, Jan 07 2009. 10 50 PM IST

 Lucrative call: Many global firms have expressed interest in entering the Indian mobile phone services market and could be potential 3G bidders. Madhu Kapparath / Mint
Lucrative call: Many global firms have expressed interest in entering the Indian mobile phone services market and could be potential 3G bidders. Madhu Kapparath / Mint
Updated: Wed, Jan 07 2009. 10 50 PM IST
New Delhi: In less than four weeks, the Union government is scheduled to hold an auction to sell spectrum rights for the so-called third generation (3G) mobile phone services. But neck deep into preparation for the auction, the country’s most ambitious such effort in at least a dozen years, some potential bidders say they are grappling with the lack of clarity in bid rules and the paucity of time.
Lucrative call: Many global firms have expressed interest in entering the Indian mobile phone services market and could be potential 3G bidders. Madhu Kapparath / Mint
A 3G phone service provides data access at speeds faster than those supported by mobile phone service technologies currently deployed in the country, such as CDMA (code division multiple access) and GSM (global system for mobile communications).
The auction of spectrum rights is scheduled for 30 January.
Companies such as AT&T Inc., Deutsche Telekom AG, Qatar Telecom Ltd, Verizon Wireless and Sistema JSFC among several other global phone firms, have expressed interest in entering India’s mobile phone services market—the world’s second ranked and fastest growing by customers—and could be potential bidders in the 3G auctions, though this has not been independently verified.
One of the major concerns that potential bidders have is that the government has not given operators enough time to prepare. “The slots for 3G spectrum and their availability in which circles were announced only in mid-December and they want to hold the auction in January. Especially at a time when most foreign operators are running on skeletal staff due to the Christmas and New Year holidays,” said a senior executive at an international phone firm, on condition of anonymity.
This executive pointed out that even this week, the government’s finance and communication ministries had not agreed on what the reserve price for the auctions should be. The finance ministry wants it to be doubled to Rs4,040 crore, a request that has been turned down by the department of telecommunications (DoT). Such a change so close to the auction date will throw his firm’s bid preparations out of gear, this executive said.
A second criticism is that the government, for the first time, plans to charge separately large amounts for a phone service licence and spectrum rights. DoT has said it intends to charge Rs1,651 crore just for the licence and 3G aspirants will have to separately bid for spectrum—a number that the government has said could net the exchequer at least Rs30,000 crore.
“This means that a successful bidder has to pay for 3G and then has to pay another $400 million (nearly Rs1,950 crore) for the (unified access service licence, or UASL)... They will pay $400 million for a piece of paper,” said Mahesh Uppal, a director with Com First (India) Pvt. Ltd, a New Delhi-based consulting firm. This payment will hurt those players who want to get into current day second generation (2G) phone services, but will have no visibility on spectrum despite paying the licence fee.
“There are hundreds of pending 2G applications with DoT; there is no chance that new UASLs will come with any 2G spectrum,” Uppal added.
The global economic slump, too, weighs on the sentiment. “The recession has had very little impact on the telecom sector, but there is a cautious attitude that many companies have adopted towards spending, which may lead to fewer bidders,” said an executive with a leading Indian phone firm.
Another major concern is the lack of clarity on the provision of additional spectrum. “For 2G, there is a clear route map based on subscriber-linked criteria for allocation of additional spectrum when needed. But for 3G, there is no route map,” said the executive with the foreign telecom firm quoted earlier.
Clarity is also required on roll-out obligations. “The roll-out obligations say that 50% of district headquarters have to be covered and 15% of the short distance charging areas (SDCA, or areas covered by major exchanges) have to be covered. Now every DHQ (district headquarters) has SDCAs and are by default covered,” a third industry executive said on condition of anonymity.
Lastly, there is lack of clarity on the ability of 100% foreign-owned companies to operate beyond the bid if they end up successful.
Indian telecom rules restrict foreign ownership at 74% and overseas firms will have to find a partner for the remaining 26%, for which some complain the stipulated 90-day period might be too short.
Still, there are those that believe that these issues are being blown up out of proportion.
“There is no issue with time given as the ministry of telecommunications issued the information memorandum on 12 December, which was well before the pre-bid conference (on 23 December),” said T.V. Ramachandran, director general of industry lobby Cellular Operators Association of India. “3G has already been delayed and India is lagging behind more than 100 countries that have already launched 3G services. It cannot be delayed anymore.”
On the yet unanswered queries, a DoT official said, “We are in the process of answering all the queries and will soon come out with all the necessary clarifications.” This official did not want to be identified.
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First Published: Wed, Jan 07 2009. 10 50 PM IST