Grey areas cloud 3G auction prospects4 min read . Updated: 17 Nov 2009, 02:45 PM IST
Grey areas cloud 3G auction prospects
Grey areas cloud 3G auction prospects
New Delhi: The much awaited (and much delayed) auction of spectrum required for third generation, or 3G, mobile services and WiMax services may not be as succesful as the government wants it to be, if the thin attendance at Monday’s pre-bid conference, held by the department of telecommunication, or DoT, is any indication.
And those who attended were disappointed with the conference failing to explain any procedural issues as well as clarify various policies.
A similar pre-bid conference was held on 23 December last year, where the attendance was at least twice that on Monday. “There was no standing room the last time around and the number of people from other countries was negligible this time around," an analyst with a global research firm said, speaking on condition of anonymity.
DoT has scheduled auctions of 3G and broadband wireless access, or BWA spectrum, or radio waves, starting on 14 January. The auction is expected to earn the government at least Rs35,000 crore.
“This auction has been designed to favour the incumbent operators and in no way does it help or allow an international telecom operator to come in with any chance of creating a viable business," the India representative of one of the largest telecom firms in the world said, speaking on condition of anonymity as he is not authorized to speak to the media. “No foreign operator would bid unless they are already present in the country and have a viable business in place already."
The 3G auction could have been an entry route for international telcos that missed out on India’s telecommunications boom. The auction will also be the first such in the country for spectrum—the primary reason for the pre-bid conference. In the case of spectrum needed to provide second generation (2G) telecommunication services (the one currently available), telcos needed to pay around Rs1,651 crore for a UAS licence (Universal Access Services) and were allocated the spectrum along with the licence depending on availability.
3G spectrum, however, which is required for higher capacity voice calls and faster data access on mobile phones, will be auctioned.
“There are too many grey areas in the policy and other matters concerning the auction. A foreign operator does not want to participate in such a scenario," added the India representative of the international telecom company.
“There are still too many unknowns, especially coming from Trai (Telecom Regulatory Authority of India), not just on norms on mergers and acquisitions, but also on spectrum trading and sharing," said a consultant who advises a number of telecom firms and who did not want to be identified given the sensitivity of the issue.
Trai is expected to come out with recomendations on spectrum management within the next three months based on the 2G spectrum committee report. The report recommends a number of policy changes including the delinking of licence from spectrum and making spectrum a tradable commodity. “If these policy changes and relaxations come into force, it could considerably increase the value of the spectrum auctioned," the consultant added.
Other issues that are a cause of concern include the availability of 2G spectrum for the successful bidders.
DoT has said that winning bidders in the 3G auction will be eligible for 2G spectrum to start plain-vanilla telephone services. However, given that existing telecom operators have been clamouring for additional spectrum on a priority basis, it is unclear whether the new allottees will get the spectrum before them.
Potential bidders are also concerned about the price of the 2G licence in the event of spectrum being delinked from the licence, considering that winning bidders would have to get a UAS licence to operate telecom services in the country.
Another grey area is the timeline for getting a licence. If a new entrant is a winning bidder for 3G spectrum, DoT has not clarified on the amount of time to be given to get a UAS licence and whether there will be a fast-track process for clearing such applications. Recently, a government security clearance for Norway-based Telenor’s acquisition of stake in Unitech Wireless (a 2G service provider) took almost a year.
“It’s in the government’s interest to come out with all" details so that “potential bidders can take them into consideration when formulating their bidding and roll-out strategies", said Kunal Bajaj, managing director with strategy analysis firm BDA Connect Ltd. This would increase the number of bidders, he added. It doesn’t make sense for a bidder to receive only 3G spectrum and no 2G spectrum, he said.
Officials of DoT present at the conference assured potential bidders that all the issues would be clarified soon. “Whatever queries have not been answered here will be answered on the DoT’s website," said J.S. Deepak, joint secretary with DoT. “On 8 December, we will come out with the notice inviting applications (NIA) which will be a legal binding document on the auction. The frequencies of the spectrum on auction will also be given in the NIA," he added.
Deepak also said that there was no link between the auction and the Trai consultation process on spectrum management.
“There were many issues that were not clarified but, overall, there was a lot of interest and the discussion was quite lively. Clarity is needed as far as the Trai 2G policy changes are concerned," a senior executive with one of India’s Top 3 telecom firms said.
“But 3G is an evolution of 2G and if 2G issues are not cleared then how do we go ahead with the auction?"