National

3G spectrum auction may be delayed further

NEW DELHI: Though the Department of Telecommunications is gearing for the much-awaited auction of spectrum for 3G (third generation) mobile services on January 30, the entire process could be further delayed going by the poor response from the industry and the stance of other Ministries concerned, particularly the Finance Ministry that has proposed a two-fold increase in the reserve price.

According to government sources, apart from the industry that has reacted negatively to any fee hike in 3G spectrum auction, some Ministries such as Law, Finance and Company Affairs want some changes to be incorporated in the 3G policy. Now the Cabinet Committee on Economic Affairs (CCEA) will discuss all these issues when it meets to give final approval for the auction.

The auction, which was initially scheduled for January 16, has now been delayed by two weeks as the CCEA is yet to give a formal go-ahead to the entire process.

As desired by the Finance Ministry, the Ministry of Communications and Information Technology is likely to present a draft note, recommending an increase in the reserve price for auction of 3G spectrum from Rs. 2,020 crore to Rs.4,040 crore, before the CCEA when it sits to approve 3G spectrum auction within the next few days. It is also likely to double the pan-India WiMAX licence fee to Rs.2,020 crore.

In fact, it is the poor response from industry to the recently held 3G pre-bid conference that prompted the Finance Ministry to suggest a steep hike in the reserve price. Industry analysts feel that the Finance Ministry, who wants to garner at least Rs.40,000 crore from the auction process, is not willing to take any chances when it comes to meeting its revenue targets. Therefore, a hike in reserve price was suggested to ensure good revenue collection even if fewer companies participate in the auction process or they bid conservatively.

Initially it was felt that the existing telecom majors along with foreign players would bid aggressively for 3G spectrum to reap riches from the world’s fastest growing telecom market. However, the global economic downturn has changed the entire scenario.

It is now expected that only existing cash-rich telecom players will be keen on participating in the bidding process, while new firms would not be as aggressive as they were while applying for 2G spectrum.

As far as the foreign players are concerned, they can adopt the wait-and-watch policy and enter the market later through the partnership route.

Similarly, the hike in the reserve price for broadband wireless aces (BWA) spectrum to launch WiMAX and other services has also left potential bidders disappointed.

Analysts feel that raising spectrum price could not only lead to costlier service in future but also hit the ambitious targets of the government of broadband proliferation in the country.

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