3G allocation deadline today, but will govt be able to deliver?

3G allocation deadline today, but will govt be able to deliver?

New Delhi: The government says it is ready to allocate 3G mobile telephony spectrum on Wednesday to operators that won the right in auction, but telecom companies are doubtful the deadline will be met, and some department of telecommunications (DoT) officials say procedural matters could delay the process.

“To my understanding, everything is on track and should be done according to the set deadlines," said telecom secretary P.J. Thomas.

Seven operators—Bharti Airtel Ltd, Vodafone Essar Ltd, Tata Teleservices Ltd, Reliance Communications Ltd, Idea Cellular Ltd, Aircel Ltd and S Tel Pvt. Ltd—won the right to offer 3G services in different regions, or telecom circles, in an auction that concluded on 19 May.

Also See High Stakes (Graphic)

According to the government’s timetable, the winners are supposed to be allocated the spectrum by 1 September, and are expected to launch commercial operations by the end of the fiscal year.

The 3G spectrum allocation will allow these firms to offer users high-speed data services on mobile phones, enabling video calling and mobile commerce and retail applications. The government raised more than Rs67,000 crore from the 3G auction, while the sale of broadband wireless access (BWA) spectrum pushed the proceeds to Rs1.06 trillion.

A senior executive at one of the winning telcos said his company was yet to be informed if the allocation will take place on time.

“The winning operators have to sign the amended licence agreement and then have to apply to the WPC (wireless planning and coordination) wing of the DoT in order to get final allocation of the spectrum," he said on Tuesday, requesting anonymity. “It is highly doubtful that this will all happen in one day tomorrow."

DoT spokesman Satyender Prakash said the spectrum will be allocated on Wednesday if operators signed the amended licence agreement.

A senior DoT official said it takes up to four weeks for WPC to allocate spectrum after the letter of intent has been issued. “But in this case, everything is ready and there should not be any delay."

Even if DoT is ready to allocate the spectrum, conflicting licence issues and procedural concerns may delay the allocation for some operators.

Aditya Birla group-promoted Idea Cellular may not get 3G spectrum in four circles due to concerns over overlapping rights with Spice Telecom, in which it acquired a majority stake in June 2008 for Rs2,700 crore.

Spice Telecom has licences to operate regular services in Punjab, Karnataka, Delhi, Andhra Pradesh, Haryana and Maharashtra. Idea, too, has licences in these circles, and has won 3G spectrum in Maharashtra, Andhra Pradesh, Punjab and Haryana.

As an operator is allowed only one licence in one circle, DoT asked Idea to surrender its redundant licences. But Idea said it will do so only after the entry fee paid for the licences is refunded. Now, DoT wants to wait until the matter is resolved before it will allocate 3G spectrum to the firm.

“Due to a lack of clarity on which licence the 3G spectrum will be allocated (Idea’s or Spice’s), there may be some delay in the operator getting the spectrum that it has won in the auction," a second DoT official said.

Both officials did not want to be named. Idea Cellular didn’t respond to emailed queries from Mint.

Reddy family-promoted Aircel, which won 3G spectrum in Tamil Nadu, faces a similar problem.

Before 2005, Tamil Nadu and Chennai made up different circles, whose licences were held by different companies—Aircel Ltd and Aircel Cellular Ltd. The approval of a scheme of merger is pending before the Madras high court.

Due to confusion over which licence should be granted for 3G spectrum auctioned for all of Tamil Nadu, DoT has decided to allow Aircel to launch commercial services in Tamil Nadu circles excluding Chennai, until the court approves the merger of the two entities.

“Aircel has applied for approval of the scheme of merger of the two licences in the Madras high court and expects that the approval should come in within the next month or less," a senior executive of the company said, requesting anonymity.

Some other winners said they were working to ensure they will be able to roll out 3G services in time.

Sanjay Kapoor, chief executive of Bharti Airtel, India’s largest telecom service provider, said he expected the allocation to happen shortly. “Our core network, transmission, passive infrastructure, intelligent network and applications, etc. are all 3G-ready. We are on the verge of finalizing our strategic partners for 3G radio to ensure a successful roll-out. Once the spectrum is awarded to us, our customers will begin to experience 3G services by the end of current financial year," he said.

“We will start offering 3G services to customers in a few months after allocation of spectrum to us," Samaresh Parida, director for strategy at Vodafone Essar, said without giving details.

Hemant Joshi, telecommunications leader in India for audit firm Deloitte, said users will have to wait a little longer to use 3G services.

“Commercial launch should be done within the next five-six months, in the last quarter of this fiscal year. But the services will take some time to warm up. It is a long-term game, and eventually revenues will show a rise," he said.

Except Japan, 3G has not garnered substantial revenue anywhere. Joshi said in India, the service will also face the challenge of poor mobile phone penetration in rural areas. “Rural India needs different product offerings. The ground reality is that only 13% of the mobile phones in India are 3G-enabled," he said. “In the short term, the general view is that the spectrum will be used to improve voice quality."

Lison Joseph contributed to this story.

Graphic by Ahmed Raza Khan/Mint