3G auction by Dec to boost exchequer

3G auction by Dec to boost exchequer
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First Published: Fri, Jun 19 2009. 11 59 PM IST

Quick fix: Communications & information technology minister A. Raja.Manpreet Romana / AFP
Quick fix: Communications & information technology minister A. Raja.Manpreet Romana / AFP
Updated: Fri, Jun 19 2009. 11 59 PM IST
New Delhi: The Union government has set the stage for the entry of the private sector into third-generation, or 3G, mobile telephony after two key ministries came to a consensus base price of Rs4,040 crore for each of the six blocks of pan-India spectrum, depending on availability.
Quick fix: Communications & information technology minister A. Raja.Manpreet Romana / AFP
The auction of 3G wireless radio, which will be concluded before December, is expected to generate at least Rs25,000 crore, with some analysts pegging the receipts at Rs40,000 crore in the current fiscal.
Third-generation services, seen as the next growth driver in Indian telecom—the world’s second largest market, will allow voice, data and video to be transmitted at high speeds to wireless devices, blurring the lines between personal computers, laptops and personal handheld units including mobile phones.
Public sector telecom operators Bharat Sanchar Nigam Ltd, or BSNL, and Mahanagar Telephone Nigam Ltd, or MTNL, were allotted 3G spectrum in September and have already launched the services commercially.
“The government wants the auction to be done within the next three months but this depends on when the cabinet committee on economic affairs (CCEA) gives its approval on the auction,” said a senior official familiar with the developments in the department of telecommunication (DoT), asking not to be identified. “Once they give their approval, then the auction can be done with 72 days.”
Also See Clearing the decks (PDF)
Separately, another official in the DoT revealed that a proposal will be sent to CCEA for approval by the end of the week. The committee can yet revise the base price if it thinks necessary.
After obtaining CCEA’s approval, DoT is expected to announce a fresh round of dates including one for the pre-bid conference, where potential bidders would get an opportunity to voice any concerns they may have.
The likely bidders include Bharti Airtel Ltd, VodafoneEssar Ltd, Reliance Communications Ltd, Tatas Teleservices Ltd and a few other new private telecom operators apart from foreign operators keen to enter the world’s fastest growing telecom market.
The transition to this technology, first proposed in September 2006, had been deadlocked after the finance and telecom ministries were unable to strike a consensus on the price. The auction, which was to go through in January, has been deferred twice.
Also See Deadlock Ends? (Graphics)
DoT wanted the reserve price for allotting pan-India 3G spectrum to be Rs2,020 crore; the finance ministry demanded that this amount be doubled. DoT had also asked for CCEA to decide on the amount of 3G spectrum to be auctioned.
DoT later proposed Rs3,540 crore as the base price as a compromise.
The issue was further complicated with the Planning Commission and the department of industrial policy and promotion (DIPP) joining the telecom ministry in opposing the finance ministry’s proposal to double the base price. The cabinet then formed a group of ministers (GoM) to sort the issue, but the group could not meet due to the onset of the 15th general election.
The deadlock was finally resolved on Friday following a meeting between finance minister Pranab Mukherjee and telecom minister A. Raja. The ministries agreed on a base price of Rs4,040 crore for each block of the auctioned 3G spectrum across the 22 operating areas in the country, the two DoT officials mentioned earlier confirmed separately.
In addition, they agreed to auction six blocks of spectrum wherever available, as opposed to the earlier proposed five blocks of 5MHz each.
Mint could not immediately ascertain whether the consensus was reached as a consequence of a meeting convened by Prime Minister Manmohan Singh with the finance minister and the telecom minister on Friday morning.
In the interim budget for 2009-10, Mukherjee had budgeted Rs20,000 crore as receipts from the 3G auction. Anything in excess would help offset the slowdown in tax receipts following the slowdown in the economy.
Analysts say that besides generating extra revenues, the auction could also provide a stimulus to the economy.
“The setting of a base price gives us a number to start with, but the auction is expected to garner significantly more for the government,” said Naresh Chandra Singh, principal research analyst with technology consultancy Gartner Inc. “This price is not very high as compared to the other countries. For example, it is significantly lower than the final bidding price in Malaysia, which has seen some of the lowest auction prices.”
Various factors contribute to the final price, including the strength of the economy and the companies involved, he added. According to Chandra Singh, the market in India is mainly a voice market so bids may be lower as bulk of the 3G spectrum would be used for voice applications.
“Since the Indian telecom sector has not been hit too hard in the current slowdown, the 3G auctions will provide it the necessary impetus for further growth,” Prashant Singhal, partner and telecom industry leader at audit firm Ernst and Young said.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Fri, Jun 19 2009. 11 59 PM IST