3G is expected to revolutionise the Indian telecom space. With the announcement of the much-awaited 3G policy, operators have gone on overdrive and are putting their 3G rollout plans in motion. The services, of course, can only be launched after spectrum is auctioned. The policy has also generated a few concerns, due to which the Department of Telecommunications (DoT) is in the process of making a few amendments to bring about more clarity.
In its most recent amendment, the government has allowed successful foreign 3G bidders to acquire Indian operators before the mandatory three-year lock-in period, as was stipulated earlier. This is expected to give a fillip to foreign telecom companies that bag 3G licences, as they can buy out existing operators who hold 2G radio frequency. As a result, the foreign players can offer both 3G and 2G services. Moreover, if a foreign operator is to bag 3G spectrum and buy an existing Indian operator, it can save on the Rs 16.51 billion required to obtain a unified access service licence.
The other key change that DoT has made to the 3G policy is making auction mandatory for allotment of all 3G spectrum to CDMA operators. Earlier, spectrum was to be allotted automatically to CDMA operators on the basis of subscriber numbers. Now, spectrum in the 450 MHz and 1900 MHz bands will be allotted to CDMA players through auction. The reserve price for the two frequencies will be notified later separately.
While these changes to the policy have been effected, DoT has stuck to its guns to retain the clause according to which having prior 3G experience is a must to bid for 3G spectrum. It has, however, amended the norms for annual spectrum charges – operators will now have to pay 1 per cent of the “incremental revenue due to 3G services” after a period of one year. The method for this, again, will be notified separately.
In the case of broadband wireless access (BWA) services, DoT has indicated the availability of the 2.3 GHz frequency band in addition to the previously notified 2.5 GHz band. It has also changed the rollout obligations for BWA services and removed the clause of covering specific areas within two years of being allocated spectrum. The five-year rollout obligations have been retained.
DoT has also decided to double the base price for Wi-Max frequencies to Rs 10.1 billion for a pan-Indian licence from Rs 5.05 billion. It is reported that in doing so, DoT might also permit successful Wi-Max bidders, including internet service providers, to provide mobile services. This, however, has not been mandated in the policy.
Despite the ongoing tussle between the finance ministry and DoT over the base price for 3G spectrum, DoT is looking to complete the spectrum auction process by end October. It will shortly appoint the specialised agency that will conduct and oversee the e-auctions.
As DoT starts the process of inviting bids, private players are in a rush to seek global expertise from the UK and US to prepare their bid strategies. This will have a direct bearing on the bid price for 3G spectrum and, later, on 3G tariffs. On the basis of its calculations involving the base price and licence fee, DoT is hoping to earn nearly Rs 400 billion from the 3G spectrum auction. It has, in keeping with the finance ministry’s line of thinking, indicated that the spectrum usage charges might be hiked eventually.
Most private operators such as Bharti Airtel, Vodafone, Reliance Communications and Tata Teleservices are hoping to launch 3G services within six months of being allocated spectrum. The government-owned service providers, Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), on the other hand, are looking to launch 3G services well before end2008. BSNL is investing close to Rs 25 billion to develop its 3G network. MTNL, according to reports, is all set to launch India’s first 3G mobile services in Delhi by end September and in Mumbai by end December. The company has finished conducting indoor trials for 3G.
BSNL and MTNL have a lead in the 3G race as they have already been awarded 3G spectrum. MTNL has received one block of spectrum each in Delhi and Mumbai, while BSNL has got spectrum in the other service areas. After the auction, they just have to match the bid price. This makes it easier for them to plan to have all district headquarters hooked up to their 3G network by the end of the year.
