New Delhi: India, the world’s second largest market of mobile phone customers, on Friday opened up its fast-expanding telecom market to phone firms offering services on a new high-speed technology— called third generation, or 3G—potentially earning the government up to an estimated Rs40,000 crore through auctions of licences to run such services.
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A 3G mobile phone service allows customers to surf the Internet or download content, including music and video, at speeds faster than current technologies. The government will start by auctioning five licences by October, telecom minister Andimuthu Raja told reporters here, and depending on spectrum available this number could be extended up to a dozen. One slot has been reserved for state-run Mahanagar Telephone Nigam Ltd, or MTNL, in Mumbai and New Delhi and Bharat Sanchar Nigam Ltd, or BSNL, for the rest of India.
“We will be able to allow only five operators initially. Subject to the availability of spectrum... 12 operators can (eventually) be allowed,” Raja said. “At least two to five operators can be accommodated right now, except for Delhi and Mumbai.” In these two cities, accounting for 45.67 million mobile phone customers, or 5.28% of India’s 286.86-million mobile phone customers, spectrum is scarce. Spectrum refers to the airwaves used to carry voice and data signals.
Services could begin as early as first half of next year, analysts said. Raja said the government’s department of telecommunications, or DoT, will appoint a committee in 15 days, which will work out modalities of the 3G auction which will be conducted electronically within two months.
Opening up: Union minister for telecommunications A. Raja
The base price for a pan-India 3G licence has been set at Rs2,020 crore, but government officials and analysts expect telecom firms—led by global players who do not have a presence in India—to bid several times that amount.
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.
Market leaders in India such as Bharti Airtel Ltd and Reliance Communications Ltd have said they are ready with their 3G plans.
If the government can indeed raise Rs40,000 crore in 3G auctions, it will help New Delhi reduce its revenue deficit by nearly 75% at the current year’s targeted revenue shortfall of Rs55,184 crore.
DoT envisages auctioning 5MHz to each operator of 3G services based on the GSM technology platform in the 2.1GHz band. Phone firms offering services on the rival CDMA technology platform will have an option to seek two blocks of 1.25 MHz in the 450MHz, 800MHz and 1900MHz bands.
The price for a CDMA-based licence will be pegged to the highest among GSM bidders for the 2.1GHz band auction; meaning the cost of such a licence per each block will be one-fourth that of a GSM-based 3G licence. GSM-based services account for three of four worldwide customers of 3G services.
Raja said new and foreign phone service aspirants would be allowed to participate in the electronic auction and, if successful, such firms would have to pay an additional licence fee that would amount to Rs1,650 crore for a pan-India licence, the amount new entrants into existing 2G, or second generation, mobile telecom services have to pay. “These foreign players need to have prior experience in rolling out 3G policies or they can align with some Indian company,” he said, adding the DoT committee would frame rules for such aspirants.
This plan, which prima facie is beneficial to existing phone service firms in the Indian market, is likely run into trouble. A telecom expert said DoT’s decision to levy a licence fee in addition to the auction prices would be unviable for new entrants.
“The argument of an entry fee of about $400 million is very, very substantial and seems to be economically indefensible,” said Mahesh Uppal, director of Com First, a telecom consulting firm in New Delhi.
BSNL and MTNL need not participate in the auction but will have to match the highest bidding price on par with other 3G aspirants, Raja said.
DoT on Friday also outlined guidelines for auction of broadband wireless spectrum using protocols such as Wimax, short for worldwide inter-operability for microwave access, a standard that is capable of data speeds of 10 megabytes per second up to 2km away from a radio transmitter. Spectrum rights for such services will be given at one-fourth the price of 3G licences but those offering it will be offered 20MHz spectrum each.
Raja also announced the guidelines for mobile number portability, or MNP, that allows users to change the service provider without changing the telephone number. According to the minister, the work for issuing a MNP licence will start in next two months and the services will be available by end of the year.
“Two licences will be allotted for MNP services and for this purpose the country has been vertically divided into two operational zones, consisting of 11 service areas. Initially, MNP will be implemented in all metro cities and category A service areas within six months of the licence being allotted,” Raja said. Phone licences in India are issued according to areas that are mostly analogous to states.