3G bids: Uncertainty may've led to new foreign telcos' absence

The lack of any new foreign telecom company’s application to join the April 9 auction for third-generation (3G) spectrum may be due to uncertainty on spectrum availability, coupled with higher cost of rolling out services.

Only those foreign companies with an existing presence in Indian telecom finally put in bids for the 3G auction. The last date for applications was March 19.

US-based AT&T and Verizon and Australia’s Telstra, among others such as Orange and Sprint, were keen to enter the Indian mobile market and participate in the auction.

According to industry experts, the uncertainty in granting 2G spectrum for successful new entrants dampened the spirits of companies for bidding 3G frequency. Moreover, even the 3G winners would be allowed to offer commercial services from only September 1, while the payment has to be made upfront within 15 days after close of the auction.

Prashant Singhal, a telecom analyst at research firm Ernst & Young, said, “There was an incremental burden on the new foreign entrants — of acquiring a unified access service license (UASL) for Rs 1,650 crore, apart from bidding in the 3G auction. The reserve base price for 3G auction has been fixed at Rs 3,500 crore, and acquiring an UASL license over that would have increased the cost substantially.”

He said the Indian market was not as profitable currently as it was one to two years earlier, because of too many players and low rates, so the business case for foreign firms was not that viable. Plus, the availability of 2G spectrum for new entrants was still an issue.

Even the Central Vigilance Commission had said that the department of telecommunications’ (DoT) 3G spectrum policy preferred Indian telecom players over foreign players, a claim DoT denied.

Another Mumbai-based analyst said the entire schedule for 3G auction was announced by DoT just a few days before, which gave foreign firms very little time to go through the details and take a proper decision. After the process was delayed for over two years, the sudden announcement on February 25 this year made it difficult for the new foreign firms to introspect and decide.

For the 3G auctions starting April 9, nine applications have come to DoT. Bharti Airtel, Vodafone Essar, Aircel, Reliance Communications, Tata Teleservices, Idea Cellular, STel — all being existing operators in the market — and Etisalat DB (earlier Swan Telecom) and Videocon, which hold licences but have not started services, applied to participate.

DoT is to auction three slots of 3G spectrum in most of the circles. The reserve price for pan-India spectrum has been fixed at Rs 3,500 crore. Out of the 22 circles, five — Punjab, Bihar, West Bengal, Himachal Pradesh and Jammu & Kashmir — will have four private players each.