Broadbandindia Magazine

The empowered group of ministers (eGoM) headed by finance minister Pranab Mukherjee fixed the reserve price at Rs 3,500 crore for pan-India 3G (third generation telecom) spectrum auction and Rs 1,750 crore for WiMax. Going by the latest deadline set by the government, the auction for 3G should be held within 95 days of the decision, i.e. by the end of this year. Not more than four slots would be auctioned in any circle, excluding stateowned telcos BSNL and MTNL which have already been allowed to start 3G operations. However, the telecom industry expressed disappointment with the Group of Ministers’ decision to peg base price at Rs 3500 crore.

Industry disappointed

Mr S.C. Khanna, Secretary, Association of Unified Telecom Service Providers of India, said, “It is very unfortunate that the base price for 3G has been increased from the earlier proposed Rs 2,020 crore to Rs 3,500 crore. This will make the service expensive for consumers and thereby 3G in India could meet the same fate as it happened in Europe. They should have auctioned all the spectrum available instead of restricting it to only four, which creates an artificial scarcity.”

Mr T.V. Ramachandran, Director-General, Cellular Operators Association of India (COAI), said, “We are disappointed with the base price though it’s lower than what was suggested by the Finance Ministry. It should have been pegged lower if the Government wanted broadband to be available to consumers at cheap rates. We are also unhappy with the disparity between 3G base price and BWA. Why should BWA spectrum be priced lower when it is similar to 3G technologies?” COAI is the representative body for GSM (global system for mobile communication) players including Bharti, Vodafone, Idea and Aircel. Interestingly, GSM leader Bharti Airtel welcomed the eGoM decision.

Bharti to participate

Bharti Airtel said that it will participate in the auction. “We welcome the Government’s decision to expeditiously complete the planned auction of 3G spectrum. We believe 3G will drive the wireless broadband revolution in both urban and rural India, contributing to inclusive growth. Bharti Airtel looks forward to participating in the auction,” said Mr Manoj Kohli, CEO and Joint MD, Bharti Airtel. Mr Prashant Singhal, partner and telecom industry leader, Ernst & Young, said: “The increase in the reserve price for 3G auctions, with a 4- slot bidding, could see some competition in lucrative markets such as Metros, A circles, but may still not see a lot of bidding and traction in the B and C circles. COAI’s rival association, AUSPI (Association of Unified Service Providers of India), representing CDMA (code division multiple access) companies such as Reliance Communications and Tata Teleservices, also criticised the eGoM decision. CDMA players RCom and Tata Tele are both in the GSM space as well.

‘BSNL & MTNL not ready for 3G

Public sector telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) should not pursue 3G (third generation) technology as it will be a further strain on their already stretched finances, according to analysts tracking the sector.

The two companies “neither have the quality subscriber base that will opt for 3G nor the ability to churn highend users from competition”. Further, matching the base price of the highest bidder will result in outflow of funds, which will weaken the finances. In the case of MTNL, a listed entity, it will also deprive shareholders of any dividends. “In our view, it makes no business sense for MTNL to match the highest bid for 3G spectrum auctions and incur capex to upgrade its network,” HSBC Securities analyst Rajiv Sharma said in a report.

MTNL is better placed to leverage its fixed line infrastructure for wireline broadband products, it added. Commenting on MTNL’s plans to involve global telcos to run 3G operations, the HSBC report said, “We believe the chances of MTNL benefiting from such a structure will be restricted as the state-owned enterprise culture of the company will get in the way of foreign telcos, restricting their ability to deliver.”In the six months of its 3G launch, BSNL has roped in just 10,733 subscribers. The figure for MTNL stands at a dismal 902, an average of just 150 per month across Mumbai and Delhi, considered the two most lucrative circles for 3G in India.

Communications minister A Raja told reporters after the eGoM meet that the government would complete the auction of 3G spectrum within three months. Around Rs 25,000 crore is expected to be raised by the government from sale of both 3G and WiMax spectrum, Raja, who is a part of the eGoM said. Reserve price for 3G auction has been a bone of contention for long and also resulted in a long delay in firming up the modalities.

The 3G auction was scheduled to be held earlier this year, but had to be deferred due to lack of consensus among various ministries on the issue of pricing. Finance minister Pranab Mukherjee said recently that the government must act fast on fixing the 3G reserve price. Also, DoT said in a presentation that introduction of 3G in India is late by a good five years already.

While the Telecom Regulatory Authority of India had initially recommended a reserve price of Rs 1,020 crore, the Department of Telecommunications (DoT) revised it to Rs 2,020 crore for pan-India 3G spectrum. Subsequently, the finance ministry sought doubling of the reserve price to Rs 4,040 crore. Now, the eGoM has set a somewhat median Rs 3,500 crore reserve price. 3G mobile services would allow fast access to high-end data services including video streaming and high-speed internet.

Recently, in a letter to DoT secretary Siddhartha Behura, finance secretary Ashok Chawla had written that “keeping in view the proposed indexation of 2G spectrum prices to the derived price of 3G auction, it would also be necessary to conclude urgently the process of auction of 3G spectrum…”