3G auction in wait mode gives more bandwidth to BSNL, MTNL

Written by Rishi Raj | Anandita Singh Mankotia | Rachana Khanzode | New Delhi, Mumbai, | Updated: Jan 31 2009, 04:55am hrs
With the 3G spectrum auction getting postponed indefinitely and the Cabinet Committee on Economic Affairs (CCEA) on Thursday referring the matter to a group of ministers (GoM), state-owned firms BSNL and MTNL are now set to be the only telecom companies to be able to roll out 3G networks during the current year. The two firms will now have at least a year and a halfs edge vis--vis private players in rolling out 3G services. They will also get more time in paying the Centre for the spectrum.

The development is expected to sour the plans of the country's largest telecom operator, Bharti Airtel, which with its sufficient reserves would have been in the most comfortable position to bid for 3G spectrum and roll out operations if the bids were held on time.

The indefinite delay comes as a breather for Reliance Communications Ltd (RComm), Tata Teleservices Ltd (TTSL) and even Vodafone. While RComm and TTSL are in expansion mode rolling out their GSM services and would have wanted more time to spend on 3G services, Vodafone had urged for postponing the auction date.

When the Centre had announced the 3G policy, it had said that PSUs will be given spectrum ahead of auction. However, they would have to pay the highest bid amounts. 3G technology and services enable video broadcast and data-intensive services through wireless communications.

State-run MTNL, which has services in Delhi and Mumbai, in December last year, was the first telecom company to launch 3G services in the country. So far, it has only made a pilot launch and commercial launch is expected later this month or next month. BSNL is expected to launch its 3G services by next month in some parts of the country.

Analysts said that with the matter being referred to the GoM, 3G services in India on a larger scale is sure to miss the target this year. This is because the issue of fixing reserve price and other auction details has the different ministries of the government split vertically. From March, the model code of conduct would come into force, thus further postponing the whole matter.

Nanditha Krishna - industry analyst, ICT practice, South Asia and Middle East, Frost & Sullivan, said, If the auctioning doesnt happen before February-end, they may be delayed for the next six months and the deployment will be pushed for another six months.

Romal Shetty, executive director, KPMG Advisory said, In the short term, the delay is hampering market attractiveness because there are other growth areas that are moving quick. At the same time, the liquidity crunch will impact the keenness look at the market.

When FE asked the minister of state for communications and IT, Jyotiraditya Scindia, whether the model code of conduct would apply to 3G auctions, he said,

Lets not jump to conclusions. Lets first try to process the GoMs decision fast. Scindia said that he was hopeful that matters would be resolved fast and 3G services would commence in the UPA governments regime.

An issue which needs to be resolved is the number of slots for which auctions have to be conducted. So far, the DoT and the finance ministry have proposed that auctions be conducted only for five slots in every circle. However, since theres more spectrum available in some circles, some feel that auctions should be held for more slots.

It is not yet clear on the number of slots available. Three participants for a single slot will bid higher than four participants for three slots, adds an industry expert. Analysts add that post-election auctions would help international players in terms of having a clear path on 3G.

Call on hold

26 September 2006

Telecom Regulatory Authority of India sends its recommendations to the department of telecommunications on 3G spectrum and BWA services auction

1August 2008

Government announces 3G and BWA auction guidelines. Auction planned for 2008 end

15 December 2008

Auction postponed to January 16

30 December 2008

Auction postponed to January 30, 2009

1 January 2009

Ministry of finance recommends doubling of reserve price for 3G spectrum and BWA services

28 January 2009

Cabinet Committee on Economic Affairs unable to decide on reserve price and whether to include Trai's recommendation of 2% administrative charge, refers to a GoM, indefinitely postponing the 3G spectrum &BWA services auction

Trai had initially proposed Rs 1,400 crore as the reserve price of 3G and BWA spectrum

DoT increased it to Rs 2,020 crore

Finance ministry further proposed raising it to Rs 4,040 crore