India draws interest for third attempt at mobile spectrum sale

By Devidutta Tripathy

NEW DELHI (Reuters) - India's leading mobile phone operators as well as aspiring new entrant Reliance Industries have applied to bid in what will be the government's third attempt at auctioning off some radio frequencies in the hope of raising billions of dollars in much-needed revenue for state coffers.

Revenues from the new licensing are crucial as the government seeks to rein in its budget deficit but two previous attempts to sell the same spectrum were boycotted by major mobile phone operators who complained the minimum bid prices were too high.

On Wednesday, the deadline for submissions of interest for the latest sale, eight companies including mobile market leaders Bharti Airtel Ltd and Vodafone Group's local unit had responded, a senior government official told reporters.

Reliance Industries, which generates most of its revenue from its energy business but acquired spectrum for a planned 4G broadband Internet service three years ago, also applied to bid in the new auction scheduled to start on February 3.

Cash-rich Reliance will be able to offer basic mobile phone services along with its yet to be launched 4G service if it wins frequencies in the February auction, increasing competition in the market that has about a dozen players.

"We are very positive about it," M.F. Farooqui, the top bureaucrat in India's telecommunications ministry said of the interest from bidders, adding he expected the revenue from the auction to top the government's target of $1.8 billion.

The government has cut the floor price for the February auction, but carriers have also demanded that the recurring annual fee they pay for operating licences be cut.

The two frequency bands to be auctioned in February are currently being used by carriers for providing basic 2G mobile phone services. But after the government removed restrictions over which technology can be used carriers are now allowed to deploy the same bands for 3G and 4G broadband mobile internet services, spurring the auction.

Bharti and Vodafone's expressions of interest in the auction reflect their need to target new spectrum in some key Indian cities in order to renew operating permits beyond 2014 even as they wait for government decision on their demands to cut the annual spectrum fee.

An independent sector regulator has proposed capping the annual fee at 3 percent of revenue for spectrum they buy from an auction in February, scrapping the 3 to 8 percent fee range currently levied. But the government is yet to decide the fee.

Telecoms Secretary Farooqui said he was hopeful of a decision on the annual spectrum fee before the auction begins.

Among others, third-ranked cellular carrier Idea Cellular and fourth-ranked Reliance Communications have applied to bid in the auction. Mobile carriers Aircel and Tata Teleservices have also submitted interests, officials said.

The Indian unit of Norway-based Telenor is also planning to bid in the auction. The company bought frequencies in select areas in a 2012 auction to operate a reduced business in India after its previous licences awarded in 2008 were cancelled, along with those of several rivals following a government mis-selling scandal.

Bidders have until January 27 to withdraw their interest.

(Additional reporting by Prashant Mehra; Editing by Greg Mahlich)