Good news for 3G hopefuls in India as the country’s much-delayed 3G spectrum (radio airwaves) auction is finally set to be held in April 2010 after 4 postponements. The 3G WCDMA spectrum auction was recently deferred to August-September 2010 due to lack of available spectrum.
 
India’s Department of Telecommunications (“DoT”) has been in a prolonged negotiation with the country’s Ministry of Defence as India’s armed forces had to vacate specific 3G spectrum required for the auction.
 
As per the information provided by the DoT on Feb 25, 2010, the last date for submission of applications for the operators is March 19, 2010. Mock auctions will be held on April 5 and 6, followed by 3G auction on April 9, 2010. The DoT will auction 3-4 slots of 3G wireless spectrum in most of its telecom zones, including in the lucrative Delhi and Mumbai regions.
 
Successful bidders will be allowed to launch commercial services in September 2010. Operators have to cover at least 90% of the alloted service area with 3G within five years from commencement of 3G services.
 
The impending 3G spectrum auction, which was originally scheduled to take place in late 2008/early 2009, was initially delayed due to disputes between the government and DoT regarding the spectrum pricing structure.
 
To expedite the spectrum auction process, DoT increased the floor price for bidding for 3G auction to INR35 billion (US$716 million) per operator from the initial price of INR20.2 billion (US$415 million). Moreover, the floor bidding price for WiMax (broadband wireless access) spectrum auction has been set at INR17.5 billion (US$360 million).
 
The 3G and WiMax auctions are expected to fetch at least INR 250 billion (US$5.4 billion). The Indian government was keen to hold the auction in the current fiscal year (ending March 31, 2010) to bridge the high fiscal deficit.
 
The government has already alloted 3G licenses to the state-owned mobile operators Bharat Sanchar Nigam Ltd (“BSNL”) and Mahanagar Telephone Nigam Ltd. (MTE) who have launched their 3G services in selected markets in early 2009. Private operators are currently offering 2G services to their subscribers.
 
The leading participants in the auction will be the top private telecom firms — Bharti Airtel, Reliance Communications, Idea Cellular, Tata Teleservices and Vodafone Essar, the Indian subsidiary of Vodafone (VOD). The operators desperately need to roll out data-intensive services as they experience contracting revenue and margins on voice services. The limited number of available license slots for auction is expected to increase the bidding price.
 
In addition to the Indian operators, the government is allowing international carriers to participate in the auctions, a move that will intensify competition in the Indian wireless market, which is the second largest in the world (after China).
 
Foreign operators such as Telenor SA, NTT DoCoMo (DCM) and Emirates Telecommunications are expected to bid for the 3G licenses. Moreover, international telecom giants such as Deutsche Telekom (DT) and France Telecom (FTE) may also utilize this opportunity to tap the lucrative Indian 3G market. However, they need to secure operating licenses to meet the pre-qualification criteria.
 
India’s 3G subscriber base is forecasted to reach 50 million by 2012. Besides fostering sizable investment in the telecom sector for the nationwide 3G deployments, the upcoming spectrum auction will further boost wireless demand in the country, driven by the wider access to advanced data applications enabled by the 3G technology.
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