3G winners can jump the queue

3G winners can jump the queue

New Delhi: The winners at India’s 14 January auction of third-generation (3G) and broadband wireless licences will be able to jump the queue of companies waiting for telecom licences, sidestepping a clause that would have barred new entrants from the race to offer high-speed services in the fastest growing telecom market in the world.

There are 343 pending applications for universal access service (UAS) licences, which are mandatory to start providing phone services in the country. The applications have been frozen since a January 2008 allocation of licences over spectrum allocation issues. Successful 3G bidders seeking to enter the Indian market for the first time would have had to go to the back of the line as per the rules.

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“They should be given the benefit of bidding and, therefore, they would be allowed to jump the queue," a senior department of telecommunications (DoT) official said on condition of anonymity as he is not authorized to speak to the media. “Depending on the quantum of the winning bid, they would be put at the head of the queue."

This will apply specifically to overseas telecom firms that have been trying to enter the second largest telecom market in the world for a while now.

Companies that don’t hold a telecom licence will still need to give an undertaking at the time of submitting applications that a nominated Indian partner firm would obtain a UAS licence before starting telecom operations, according to the revised information memorandum published on DoT’s website on Saturday night. The move to relax the rules for new entrants seeks to resolve the difficult situation that DoT found itself in almost three years back amid questions regarding the fairness of such a move.

International operators are not satisfied, however, with DoT’s latest 3G auction prescription, which doesn’t elaborate on 2G spectrum.

“Nobody will want a (3G) licence without (2G) spectrum. This has clearly been designed to favour the incumbents," said B.K. Singhal, former chairman and managing director of Videsh Sanchar Nigam Ltd, now known as Tata Communications Ltd, and senior principal of Delhi-based consulting firm Dua Consulting. “The information memorandum is a non-starter for anyone wanting to enter the Indian market." A senior executive of an overseas company said allowing winning bidders to jump the queue was unfair.

“Why would a firm which has been in the queue for the better part of the past two years allow another firm to overtake just because they are bidding for something else," he said on condition of anonymity due to the sensitivity of the issue. “There are other issues like the fact that DoT has said on record that there is no 2G spectrum available. Why would any operator want to come in at this stage of the market at a disadvantageous position?" The government is in a rush to hold the auctions for high-speed licences as they have been delayed by two years already and it wants to bring in the money in the current fiscal year itself.

“The government has made a few concessions to the foreign operators given the time constraints by allowing them to bid and get the required licence later just to convince people to bid," said a regulatory expert, who didn’t want to be identified because of the sensitivity of the issue. “As far as I know, most of the foreign telcos are unwilling to bid and would prefer to (go in for acquisitions) as the market is already crowded. They are not keen to ramp up from zero."

As far as the existing applicants are concerned, “they had all applied for the wrong reasons and there isn’t much that they can do, as DoT is well within its powers to take such a step", he said.

The Telecom Regulatory Authority of India (Trai) is working on recommendations on delinking the licence and spectrum as well as merger and acquisition guidelines, said the executive cited above.

“There is no clarity on how much the licence will cost and what the procedure will be given that the existing operators have already got licences with 2G spectrum attached," the executive said.

DoT will ensure that a fair and transparent procedure will be arrived at, said another official belonging to the department. “It is not clear how much the new UAS licence will cost and whether it will come with 2G spectrum or not as was the case earlier," he said.

The government has not accepted any fresh applications for telecom licences after 1 October 2007. In January 2008, it allotted about 120 new licences to nine companies, which had applied before 25 September 2007, including Unitech Wireless Ltd, Sistema Shyam Teleservices Ltd and STel Ltd.

DoT had also asked Trai to give its recommendation on whether new operators that win the 3G auction would be given UAS licence immediately, or whether they would have to wait along with the 343 existing applicants for a similar purpose.

Trai had released a consultation paper seeking comments from stakeholders on the spectrum committee report, which had recommended a number of reforms to the existing telecom policies on 16 October.

These reforms include the auction, sharing and trading of spectrum. Under the present policy, India’s telecom operators do not pay for spectrum, but are allocated frequencies on the basis of the number of subscribers they have for an annual fee known as the spectrum usage charge. Operators are given start-up spectrum free along with the licence.