EGoM fixes 3G reserve price at Rs 3,000 crore

Sees auction within 90 days; four licences to be issued.

The Empowered Group of Ministers today decided to fix Rs 3,500 crore as the base price for a pan-India 3G spectrum which will be auctioned in the next 90 days. In simple terms, it means Indian consumers would have a choice of 3G operators by the beginning or middle of next year

The EGOM, under the chairmanship of Finance Minister Pranab Mukherjee, has also decided to give four licences, apart from the one already given to state-owned Bharat Sanchar Nigam Ltd or Mahanagar Telephone Nigam Ltd.

The group also decided to fix Rs 1,750 crore as the base price for auctioning for broadband wireless assess services (BWA) and has decided to issue three licences.

Telecommunications minister A Raja told reporters after the hour-long meeting: “I do feel the Government of India, putting together 3G and Wimax, will easily get Rs 25,000 crore.”

The base price fixed by the EGOM represents a compromise between the Department of Telecom (DoT), which had suggested doubling of the reserve price recommended by the Telecom Regulatory Authority of India (TRAI) to Rs 2,020 crore and that of the Ministry of Finance, which had said the base price should be fixed at Rs 4,040 crore, so that the government could get more revenue.

The EGOM has also accepted one of the three options suggested to the group, of auctioning four blocks, excluding one already allocated to BSNL or MTNL. This was in accordance with TRAI's recommendation, endorsed by the Telecom Commission. The other two options, of auctioning of all available spectrum or auctioning of more than four blocks but not all available spectrum, have been rejected.

The telecom ministry will now announce a detailed programme for the auction, which will include a pre-bid conference in the next couple of weeks, a source said. The country’s 3G road map has already been delayed by a year as a result of differences between the DoT and the finance ministry, on the number of licences and on the base price for auction.

In the presentation to the EGOM, the decision of allowing four players was justified on the grounds that, according to DoT, there are five serious bidders and in this alternative, demand will be more than supply.

This would also help maximize government revenue per block of spectrum auctioned and will be a market-determined price. Auction of a larger number of blocks would lead to fragmentation of scarce spectrum and its consequently inefficient utilisation.

In his Budget for 2009-10, Mukherjee had estimated raising Rs 35,000 crore from auction of spectrum, both 3G and 2G, in future allocations.