The department of telecommunications (DoT) on Thursday clarified that foreign telecom companies can bid for 3G spectrum without teaming up with an Indian partner. Only on winning a bid, for applying for unified access service licence (UASL) they would be required to partner with an Indian company in accordance with the foreign direct investment (FDI) requirement. In the telecom sector, FDI is allowed up to 74%. So, a foreign company would need to find an Indian partner for the balance 26% to be eligible for a licence and start services.
There was confusion among the foreign companies regarding whether they needed to form JVs with Indian companies before bidding for spectrum or after winning the bid but before applying for licence. Third generation or 3G services provides for faster data download and video streaming.
Despite fears that the demand of foreign telcos of giving them a time frame of six to seven months to find an Indian partner after winning a spectrum auction would delay the 3G roll-out, DoT secretary Siddharth Behura said that though foreign telecom companies would be allowed to participate independently in the 3G auction, this wouldn?t further postpone the 3G roll-out in the country.
According to the 3G guidelines announced by the government, foreign telecom companies can bid for the 3G spectrum and once a company wins a bid, it would then be allotted a UAS licence (non-licence holders). This is a shift away from the government?s 2G policy wherein a telecom start-up receives start-up spectrum of 4.4 MHz bundled with a pan-India UAS licence for Rs 1,651 crore.
The government is expected to garner at least Rs 40,000 crore from the auction of 3G spectrum in the country. 3G spectrum would be available in 2 blocks of 5MHz each in the 2.1 GHz. However, as first reported by FE, this amount of spectrum would be insufficient for new players to roll out services. The amount is feasible for existing players who have to lay their 3G network over the 2G.
FE had earlier reported that 3G services would not make a good business case for foreign telecom firms as they would have to invest upwards of Rs 17,000 crore to support a measly customer base of 50 lakh. As against them the existing service providers would have to spend Rs 13,500 crore.
A foreign player would first have to acquire a mandatory UASL, which on a pan-India basis costs Rs 1,651 crore. As per industry estimates, the bid for the spectrum would be around Rs 7,500-8,000 crore. Therefore, these players would have to pay around Rs 9,651 crore for licence and spectrum alone and at a time when the global financial turmoil is gripping the world, raising such funds for foraying into emerging markets would indeed be hard to come.
