New Delhi: The Union law ministry has said it sees no legal hurdles for a government proposal to allow new telecom aspirants to participate in an international auction for awarding licences for so-called third generation or 3G phone services in India and has suggested that a final decision be taken by a group of cabinet ministers.
This recommendation paves the way for the government to opt for an open auction inviting global bidders for the award of 3G licences. A final decision will be taken by the government’s department of telecommunications, or DoT, in consultation with the finance ministry. Communications minister Andimuthu Raja met finance minister P. Chidambaram late on Thursday afternoon but Mint could not ascertain the outcome of that meeting.
A 3G mobile phone service allows high speed data connectivity enabling services such as live video, Internet surfing, email and other data-heavy applications on a mobile phone. India, the world’s second largest mobile phone services market behind China by customers, also has the fastest growing demand for such services. Global firms such as AT&T Inc., Deutsche Telekom AG and NTT DoCoMo Inc. have expressed interest in entering the Indian market, and the 3G auction could be an opportunity for them to sell such services to customers known for their avid interest in watching cinema and live sports broadcast.
DoT had sought legal opinion from the law ministry on concerns raised by India’s telecom regulator that a 3G auction should be limited to existing players in the business to guard against high bids that may turn out to be unsustainable and hurt consumers through high tariffs that come as a result of such bids.
Minister Raja said last month that he favoured opening up 3G bidding to new Indian and international firms. Such a move could help the government receive licence fees in excess of $5 billion, or Rs21,400 crore, in the very first year—revenue collections that could reduce the government’s revenue deficit by nearly 40%, assuming the current year’s targeted revenue shortfall of Rs55,184 crore.
DoT had also expressed concern on overlooking some 342 licence applications from new players interested in offering mobile phone services based on the current so-called second generation technology while allocating spectrum for 3G services to new applicants.
Expressing its opinion, after evaluating the recommendations of the Telecom Regulatory Authority of India and DoT’s stand, the law ministry said it was legally permissible for the government to specify pre-qualification norms for international competitive bidding as long as these were objective and applied on a non-discriminatory basis. The law ministry added that it would be for DoT to decide to open up 3G licences to international competitive bidding or restrict it to existing licensees.
The law ministry, whose recommendation was reviewed by Mint,has clarified that since 3G technology is different from that of 2G, a new licence that is to be issued for successful bidders will not amount to backdoor entry for providing basic telecom services.
DoT secretary Siddharth Behura could not be reached for comment, while calls to the mobile phone of law secretary T.K. Viswanathan went unanswered. One telecom industry lobbyist, who declined to be identified, said the government may announce its 3G auction rules and policy before the month end. This could not be independently verified by Mint.