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3G bid prices may surge as slots are limited

3G bid prices may surge as slots are limited
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First Published: Thu, Feb 25 2010. 10 42 PM IST

Graphic: Yogesh Kumar / Mint
Graphic: Yogesh Kumar / Mint
Updated: Thu, Feb 25 2010. 10 42 PM IST
New Delhi: The department of telecommunications (DoT) will offer three high-speed mobile licences in India’s most congested telecom areas and four in a few others when it auctions 3G spectrum on 9 April, with limited slots likely to push up bid prices.
Under DoT’s notice inviting applications (NIA), which was issued on Thursday, India will auction three slots of 5Mhz each in most of the 22 zones, including Delhi and Mumbai regions. Third generation, or 3G, mobile services allow high-speed data usage on mobile phones including video streaming and video conferencing.
With just three slots available in most of the circles, “the bids could go up to three times the reserve price,” an analyst with the Mumbai-based branch of an international brokerage firm, said on condition of anonymity as he is not authorised to speak with the media. The government has set a reserve price of Rs3,500 crore for a pan-India 3G slot.
The five circles where four slots are available are Punjab, Jammu and Kashmir, West Bengal, Himachal Pradesh and Bihar.
Graphic: Yogesh Kumar / Mint
“This is because the spectrum for four slots is available here,” said a senior DoT official, who declined to be named because he is not authorized to speak with the media.
The government had earlier planned to auction four slots in Mumbai, two in New Delhi and none in Rajasthan and the North-East, but this was changed by the cabinet in its meeting earlier this year, which decided to auction four slots wherever available.
“It’s good that they are going ahead,” said Mahesh Uppal, director with regulatory consulting firm Com First (India) Pvt. Ltd. “It is unlikely that many foreign operators will bid, but the auction is an important basis on which future spectrum management will be looked at.”
Two days after the completion of the 3G auction, the government will auction BWA (broadband wireless access) spectrum needed for rolling out Wimax services to increase broadband penetration, especially in far-flung areas where cables cannot reach.
Wimax, short for Worldwide Interoperability for Microwave Access, is a technology similar to wireless fidelity, a standard that helps hand-held devices and laptops to access the Internet.
The NIA, which is a legally binding document, makes clear that not more than one block of 3G spectrum and one block of BWA spectrum would be allocated to any single bidder in a service area.
The auction, which was to have taken place in January last year, was postponed at least four times since then due to various factors including the government not knowing how much spectrum there was to auction and differences between the ministry of defence and DoT over vacation of 3G spectrum.
The defence ministry has agreed to vacate the necessary radio waves by September when an alternate optical fibre cable network being built for the armed forces will be partially ready.
Another reason for the delay was the law ministry’s objection to DoT’s proposal to refund the money of winning bidders if spectrum was not allocated in the given time. The government has now decided that the money will not be returned and operators can start commercial use of the frequencies from 1 September.
The government expects to earn a minimum of Rs35,000 crore from the auction, money that’s expected to help reduce the ballooning fiscal deficit, currently at a 16-year high.
The last date for submission of applications is 19 March. A mock auction will take place on 5-6 April.
The government said in the Economic Survey for 2009-10 tabled in Parliament on Thursday that the auction would allow foreign operators into the Indian market.
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First Published: Thu, Feb 25 2010. 10 42 PM IST
More Topics: 3G spectrum | Telecom | Bids | Auction | DoT |