3G spectrum bids to start at Rs35bn

Indians may soon get to surf the web at ultra high speed on their high-end mobiles, besides making video calls. The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee fixed the reserve price for third-generation (3G) radio frequency auction at Rs35bn. Any telecom company bidding for pan-India 3G spectrum will have to pay a minimum of Rs35bn. This is nearly Rs5bn lower than the base price that Telecom Minister A Raja and Finance Minister Pranab Mukherjee had agreed to during a meeting with Prime Minister Dr. Manmohan Singh in June. It is nearly Rs15bn more than the price specified by telecom regulator TRAI, which had set a base price of only Rs20.2bn.

The EGoM also decided that a total of five players will be allowed to offer 3G services in every circle, of which one slot will be reserved for state-owned telcos BSNL & MTNL. Raja and Mukherjee had earlier decided to have seven players per circle. The Department of Telecom (DoT) had presented three options to the EGoM - retaining the reserve price at Rs20.2bn as recommended by TRAI, double it to Rs40.4bn as demanded by the Finance Minister, or agree to a figure of Rs35bn.

The EGoM also decided that the reserve price for WiMAX spectrum will be Rs17.5bn and has decided to issue three licences. "We hope to complete the 3G auctions within 90 days and we expect to get a minimum of Rs250bn from these auctions," Raja said. In his Budget for 2009-10, Mukherjee had estimated raising Rs350bn from auction of spectrum, both 3G and 2G, in future allocations.

Industry expressed disappointment with the policy announced. Both GSM and CDMA players said that the base price for 3G auction was on the higher side and the EGoM should have stuck to the initial figure of Rs20.2bn for 3G spectrum. BSNL and MTNL have already been given spectrum for both types of services.

Operators who win the 3G bidding will get a chunk of 5 MHz spectrum and Broadband Wireless Access (BWA) players will get 20 MHz. Only 1.25 MHz spectrum has been earmarked for one CDMA player. With only four slots up for grabs, the Government can expect some aggressive bidding considering there are least 6-7 players eyeing the 3G segment.