More bad news for telecom operators and 3G hopefuls in India as the country’s much-delayed 3G spectrum (radio airwaves) auction has been postponed again and is not likely to commence until August-September 2010. This represents the fourth postponement over the last year. The 3G WCDMA spectrum auction (scheduled for January 14, 2010) was deferred to mid-February 2010 in late 2009 due to lack of available spectrum.
India’s Department of Telecommunications (“DoT”) is working closely with the country’s Ministry of Defence as India’s armed forces have to vacate specific 3G spectrum required for the auction. The Mininstry of Defence cannot vacate the spectrum until a fiber-optic cable network is built to connect key defence locations, a process which may continue till mid-2010. DoT cannot start the auction unless specific frequencies are vacated by the armed forces.
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).
DoT announced in August 2009 that it will issue four 3G and three WiMax spectrum slots nationwide. DoT currently has the required spectrum to auction two 3G slots with the Ministry of Defence holding the necessary airwaves to auction the remaining two. 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, which now seems a distant possibility.
The government has already alloted 3G licenses to the state-owned mobile operators Bharat Sanchar Nigam Ltd (“BSNL”) and Mahanagar Telephone Nigam Ltd (“MTNL”) 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 desparetely 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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