Foreign firms' 3G quality may suffer for want of spectrum

Foreign operators may fail to provide quality 3G services, unlike their Indian counterparts, as the Department of Telecommunications (DoT) is offering spectrum in tranches of 5 MHz, which is insufficient for starting operations.

On the other hand, Indian telecom service providers will offer 3G services on the existing 2G spectrum. The 5 MHz will be provided under the 2.2 GHz band. “The foreign operators may find 3G spectrum in tranches of 5 MHz to be insufficient for quality 3G services. However, this is not a concern for the Indian operators as they can use 2G spectrum to support 3G operations as well,” DoT Secretary Siddhartha Behura said.

Alternately, foreign players can enter the sector through mergers and acquisitions (M&A) as Indian laws permit 74 per cent foreign direct investment (FDI) in the telecom sector.

“This would really help the foreign telecom players to offer quality 3G services,” he added.

An analyst said, “The acquisition route would not be an easy way out for a foreign player as none of the existing players are keen on offloading their stake. Moreover, acquiring stake in new players does not guarantee 2G spectrum for pan-India operations as the DoT is yet to provide spectrum across all the 22 circles in the country”.

The DoT is promising additional spectrum depending on subscriber addition (and availability), but this will be difficult due to the competition in each circle.

A top executive of a global telecom company said it will not make economic sense to invest around Rs 20,000 crore (estimated cost of 3G spectrum) to support a customer base of 5-6 million. The companies were expecting customer addition of around 6 million in the first few years of operations.

Moreover, a global service provider partnering with a non-industry player will have to shell out an additional Rs 1,651 crore for the Universal Access Service Licence (UASL). The investments in network and technology will run into crores, the executive added.