In a move that could usher in tough competitors into India’s mobile phone services industry, the fastest-growing in the world, the government plans to allow new international players to participate in auctions for the so-called third generation (or 3G, a cellular technology that enables speedy data transfer) licences when they come up for bidding later this year.
Communications and information technology minister Dayanidhi Maran has said the auction of spectrum for starting 3G mobile services will be open to all bidders, irrespective of whether they have a presence in the country.
“The auction of 3G spectrum will be completely distinct from the existing mobile licences and services,” Maran told reporters here. “We want to see new international players come to India and offer their services.” Maran’s statement is the clearest indication yet that the extra spectrum to be released under the planned 3G licence is likely to be used to increase competition in the mobile-phone industry.
Maran declined further details. “This is all I can say now, you can read between the lines,” the minister said.
The spectrum required for 3G services and expansion of the current crop of a dozen cellular operators in the country is expected to be available by July, Maran said, adding that the communications ministry will come out with a plan for spectrum allocation and auction “any time now”.
The country’s telecom regulator in September recommended that the government auction 3G licences separately, giving no special preference to existing cellular operators, who together account for nearly 170 million mobile-phone customers.
The move is likely to attract the attention of international players such as Deustche Telekom AG, Verizon Communications Inc. and NTT DoCoMo who have missed the Indian cellular boom.
“We are likely to see a huge amount of interest from overseas players...from markets such as Europe, Japan and Saudi Arabia, where growth has more or less saturated and operators are sitting on huge surpluses,” said Romal Shetty, director for telecom for consultant KPMG India.
Radio spectrum—the primary raw material for running wireless services—for cellular operators is scarce in India as government users, mainly the armed forces, have been allocated a major chunk of usable frequencies. As of now, the government has licensed out only about 50 megahertz (Mhz) of spectrum in the most congested cellular networks in cities such as Delhi and Mumbai, and around 25Mhz in low-subscriber areas such as the Northeast. According to recommendations of the Telecom Regulatory Authority of India, a total of around 30Mhz will be auctioned for 3G services in blocks of 5Mhz each.
“Each unit of spectrum under 3G technology can carry two to three times the traffic that a normal GSM-based network does,” said Shetty. As a result, he pointed out, a player having even 5Mhz of 3G spectrum can support as many, if not more, voice subscribers than the existing GSM players who have been provided a maximum of of 10Mhz each.
Experts also point out that opening up of the 3G services to players outside the current pool of operators is the only way to ensure proper roll-out of such services. “The Indian voice market is currently expanding at a rapid rate, requiring billions of dollars of investment a year,” said Alok Shende, head of the tech practice at Frost & Sullivan. “In such an atmosphere, to effectively ensure the roll-out of 3G services, you have to open up the market to new entrants.” The move is likely to spur the Indian operators to bid aggressively as well, he added.
Pure 3G players, however, are unlikely to drive cellular penetration in rural areas, given that even low-end 3G phones cost $100-125 (Rs4,100-5,125) each. “The 3G model has been designed for data, so it will make sense to focus on urban areas where the demand for such services exist,” said Shende.
Both the trade associations of mobile operators, the Cellular Operators’ Association of India and the Association of Unified Service Providers of India (Auspi) are opposed to the move to open up 3G spectrum auction to new entrants.
“3G spectrum should be given only to the existing operators because they have a natural advantage,” said Auspi general secretary S.C. Khanna. “They already have a network on the ground... Giving spectrum only to them will ensure that the bid prices are low and the consumers are not charged higher.”
Besides the 3G policy, Maran also said the government will shortly come up with a broadband policy that will aim to connect nearly 1.3 lakh schools and colleges by the year-end. “The project will be funded using the reserves of the Universal Service Obligation fund (USO fund), and carried out in association with the human resources development ministry,” he said.