Government to auction 3G spectrum in next 3 months

Government to auction 3G spectrum in next 3 months

New Delhi: India will auction spectrum for high-speed wireless services, popularly called 3G (third-generation) services, in the next three months, minister for communications and information technology (IT) A. Raja said.

He added that the government expects to raise Rs25,000 crore from the auctions. This year’s Union Budget announced in July had estimated that the government could earn around Rs35,000 crore from the auction.

Companies that win the auction but do not have a licence to offer telecom services in India will have to acquire one within three months by paying a fee that is yet to be decided by the government.

Raja’s announcement follows a decision by the so-called empowered group of ministers, or eGoM, that was set up to address the contentious and controversial issue of pricing the spectrum to auction as many as four slots in each of India’s 22 phone service zones. State-owned telecom companies Mahanagar Telephone Nigam Ltd, or MTNL, (in New Delhi and Mumbai) and Bharat Sanchar Nigam Ltd, or BSNL, (everywhere else) have been given 3G spectrum.

The ministerial group headed by finance minister Pranab Mukherjee has fixed the base price for a slot of pan-Indian spectrum at Rs3,500 crore.

Thursday’s decision ends a more than a nine-month deadlock on pricing that has delayed the auction and made India the biggest economy in the world not offering 3G wireless services.

Bharti Airtel Ltd, India’s largest wireless operator, Vodafone Essar Ltd and other telcos may gain by offering faster data-centric services that could help them offset slowing revenue growth in the more profitable urban markets. 3G mobile services allow for greater capacity and high-end mobile data services including video streaming and high-speed Internet access.

The government plans to auction a total of four slots wherever the spectrum is available after giving one slot to the the state owned operators BSNL and MTNL in their respective circles. The state-owned telecom companies will have to match the highest winning bid for the spectrum that they receive after the auction is done.

The eGoM has also decide to auction three slots of Broadband Wireless Access (BWA) spectrum wherever it is available, with the reserve price for each pan-India slot set at Rs1,750 crore. “Three slots are immediately available for BWA," Raja said. In addition, BSNL and MTNL have also been given BWA spectrum.

BWA spectrum is necessary for rolling out Wimax services to significantly increase broadband penetration, especially in far-flung areas where cables cannot reach. Wimax, short for Worldwide Interoperability for Microwave Access, is a telecommunications technology similar to Wi-Fi, or wireless fidelity, a standard that helps hand-held devices and laptops to access the Internet. Wimax is much faster and offers a longer range.

The department of telecommunications had given the ministerial group the option of fixing the base price at Rs2,020 crore initially but this was later changed to Rs4,040 crore after the finance ministry wanted more. The government was looking to narrow its fiscal deficit with money raised from auctioning 3G spectrum. The group has taken the middle path after private operators requested that this amount be lowered.

However, both Wimax and 3G aspirants say the base price is still high.

“It is a bit high. The price of Rs1,750 crore is a bit high. It is a bit unfortunate that it is so high," C.S. Rao, chairman, Wimax forum, India chapter, said. “We are happy that three slots have been selected but we would have been happier had it been four slots. On a Mhz to Mhz comparison, the price is one-fourth the price of the 3G spectrum which is what Trai (Telecom Regulatory Authority of India) and others had recommended," he added. “We would have liked it to be delinked from the 3G spectrum auction."

Trai is the country’s telecom regulator.

Cellular operators echoed that sentiment.

“Rs3,500 crore is too high. There is no business viability at that price. Many operators will just not enter the auction at this price. If you want affordable broadband in India, then it is not going to happen at this price level," said T.V. Ramachandran, director general of the Cellular Operators’ Association of India, one of India’s primary telecom lobbies. “I endorse the Rs1,750 crore price for BWA. But 3G should also have been at that price."

An expert welcomed the move to auction the spectrum and said it had been much-delayed resulting in significant losses to the government. “Hopefully the reserve price will not make much of a difference given the high number of operators in India and the few slots that the eGoM has decided to auction," Mahesh Uppal, director, Comfirst (India) Pvt. Ltd said. “I think the disparity of between 3G and BWA is a negative. I don’t think anyone can justify this disparity."

The chief executive of Bharti Airtel said his company was looking forward to participate in the auction. “We believe 3G will drive the wireless broadband revolution in both urban and rural India, contributing to inclusive growth," Manoj Kohli, CEO and joint managing director, Bharti Airtel said in a statement.

Bloomberg contributed to this story.