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Foreign players show disinterest to bid for 3G airwaves
By siliconindia
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25,000-30,000 crore from the auction of 3G and WiMAX spectrum. "Even if foreign players don't show up, we have 13 existing operators competing for four slots. The demand is far greater than supply," observed an official in the Communication Ministry. The government has set 3,500 crore as the minimum bid price for 3G spectrum and half that for WiMAX, a competing wireless broadband technology.
The reserve price for 3G spectrum has gone up by 75 percent to 3,500 crore, and the global economic crisis has cooled the appetite of foreign phone firms that were desperate for a foothold in the world's fastest growing telecoms market.
Moreover, the entry of several new players has triggered a damaging price war, sending the valuations of telcos crashing and resulting in most analysts downgrading the sector. Indian telecom companies were of the view that the poor turnout from their side at the pre-bid meet was because all incumbents are familiar with the 3G auction process.
"There were hardly any changes in policy or the auction rules in the latest information memorandum, when compared to that of last year, except for the base price. So, the curiosity factor and interest has died down," said an executive with an Indian cellphones operator.
But foreign mobile operators have bigger problems. A top executive with an overseas phone firm said that the current policy for the 3G auctions is skewed against new entrants and it does not make a 'business case' for them to participate in the upcoming sale of radio frequencies.
Foreign telcos that do not have operations in India have complained that while new 3G players will have to pay $410 million to obtain a license to provide wireless and wireline services, they won't get the start-up 2G spectrum that is required to provide traditional voice and data services. "So far, the Universal Access Service licence, which costs 1,651 crore, came bundled with start-up 2G spectrum. 3G winners are mandated to take UAS licenses without any guarantee of 2G spectrum. Nobody wants to take a gamble which can lead to a $400 million loss. Besides, no new operator can launch 3G services with a mere 5 MHz of spectrum on auction. If the government was serious on foreign participation, they should have allowed these companies to bid for multiple slots," observed BK Syngal, Senior Principal, Dua Consulting, and Former Chairman of VSNL.
Communications regulator Trai is also planning an overhaul of rules governing the telecom sector, including changes that will allow mobile phone firms to buy each other out and trade in wireless spectrum. But Trai's recommendations will be ready by December 2009 and a new policy can be put in place only in March 2010.
Meanwhile, the telecom department also said that it had rejected a demand from industry as well as Bharti Airtel chairman Sunil Mittal asking for the auction of four 3G slots in all circles, even in those regions which do have sufficient airwaves. Industry wanted the government to create a waitlist and award 3G airwaves to all winners together in June 2010 when the defence forces vacate additional spectrum.
"The concept of a waitlist will create more confusion. At the same time, we will make all efforts to ensure that defence vacates airwaves so that we can auction four slots in all circles," said J S Deepak, Joint Secretary, Department of Telecom.
DoT officials also said that the 3G auctions for CDMA operators would be held two days after the conclusion of the sale of airwaves to GSM players and simultaneously with WiMAX auctions.