New Delhi: The government has decided to auction only three slots of 3G, or third generation spectrum, rather than four, according to the draft of the notice inviting applications (NIA) that has been reviewed by Mint. The draft says the auction for third generation spectrum will take place on 12 February.
“There were three slots in all the circles while to get four slots we would have (had) to wait till January next year so we decided to get the auction done ...; additional spectrum can be auctioned at a later time,” a senior official of the department of telecommunications (DoT) said, speaking on condition of anonymity as he is not authorized to speak to the media. “We don’t see the need for additional spectrum in the near future but we do see the need to auction 3G spectrum as soon as possible.”
Mixed response: A file photo of a mobile phone user. The government has now decided to auction only three slots of 3G rather than four. Hemant Mishra/Mint
It may be recalled that an empowered group of ministers (eGoM) on 3G had decided in August to auction four slots with a reserve price of Rs3,500 crore. Minister for communications and information technology A. Raja had said that the government would earn Rs25,000 crore from the auction which would help reduce the fiscal deficit.
The reduction of the number of slots being auctioned to three may not hurt the government’s earnings. According to analysts, since there are three slots in each circle now, as against some circles having only one slot available earlier, the government may end up earning substantially more.
An analyst said the reduction was bad news for telcos.
“This is an overall negative move from the point of view of the telecom operators. In some markets, there are more than six GSM operators with at least seven-eight potential bidders. When there were four slots there was an artificial scarcity and now with three this could get far worse,” said a senior analyst with a Mumbai-based branch of an international brokerage, who spoke on condition of anonymity as he is not authorized to speak to the media.
“Earlier the bids were expected at one-and-a-half times the reserve price. Now this could easily go up to two or two-and-half-times the reserve price,” he added.
According to the draft, three slots will be auctioned in all of the circles or operating areas, but winning bidders will be allowed to start their 3G services only after 1 September. The ministry of defence is expected to vacate the remaining slot of 3G spectrum by then based on its memorandum of understanding (MoU) with DoT.
The draft specifies slots of spectrum that are up for auction for both 3G as well as broadband wireless access (BWA) and CDMA spectrum in the 800MHz band. Interestingly, while everyone is allowed to bid for 3G and BWA spectrum, only telecom firms currently operating a CDMA network can bid for CDMA spectrum. This goes against the government’s stated policy of technology neutrality. Currently, operators are allowed to use both CDMA and GSM mobile technology standards.
“This shows that the government is being contradictory in its stance on the technology neutrality but there is not much of an impact as it is unlikely that the GSM operators want CDMA spectrum,” the analyst at the international brokerage said.
NIA is a legal document that has all the information needed by potential bidders for participating in the auction. This includes the method of the auction, the frequency of spectrum that is up for auction, and details of how spectrum will be allocated.
On the issue of payment of the winning bid amount, the draft document, reviewed by Mint, says winning bidders will have to pay the bid amount in two tranches—one fourth within five calendar days of the closing of the auction and the remainder within 15 days after that.
However, senior officials in the government say this is liable to change as none of the operators are willing to pay the billions of dollars, that they are expected to bid, and be allocated the spectrum six months later. The government is likely to allow them to pay the remainder amount at the time of allocation of the spectrum in September as reported by Mint on Monday.