Sector Update: Telecom

Sector Update: Telecom

The Department of Telecommunications (DoT) has changed its earlier decision to conduct simultaneous auction for third generation mobile (3G) and broadband wireless access (BWA, WiMAX) spectrum.

According to the draft information memorandum for the auction, expected to be released shortly, spectrum will now be auctioned in two phases.

While the bidding for WiMAX spectrum will be held on 16 January, 2009, the radio waves for 3G mobile services are likely to be put on the block in the second phase starting 9 February, 2009.

The DoT has also decided to impose a revenue share of only 1% on operators winning WiMAX spectrum. In comparison, operators winning 3G spectrum will have to pay 2% additional revenue share if they have more than 8 MHz of 2G spectrum and 1% if they have less.

In addition, WiMAX players have been allowed to pay spectrum charges after one year of getting the radio waves while 3G operators will have to start paying retrospectively starting January 2009.

Thus, with the auction being done sequentially, some of the operators may now have the option to skip the 3G auction altogether and participate in WiMAX auction only.

Simultaneous auction, on the other hand, would have raised the uncertainty levels, which in turn would have made the auction for both equally aggressive.

However, government officials said that they would get better valuation for WiMax spectrum by auctioning it first.

The government is expecting to earn Rs30,000 crore from the auction process, which will be conducted online. The DoT is planning to auction 5 blocks of spectrum for 3G and 4 blocks for WiMAX-based broadband services in each circle.