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3G auctions run into fresh storm

BS Reporters  |  New Delhi 

Finance Minister Pranab Mukherjee's ambition to collect Rs 30,000 crore from the auction of third generation (3G) telecom licences this year is in jeopardy, with the department of telecommunications (DoT) saying it is being forced to curtail its auction plans from four slots to three.

DoT prepared an internal note last week also suggesting an alternate payment structure for winning bidders who do not get spectrum immediately.

The process would entail modifying the bid documents and, therefore, require reference to the law ministry. It is likely to delay the process of inviting bids, which was due in the first week of December, by two to three weeks.

The reason for the delay is the defence ministry expressing its inability to release 15 Mhz of spectrum, the airwaves that enable high-speed internet access, before the auction schedule.

This was the same issue that had created considerable controversy in November, causing Finance Minister Pranab Mukherjee to hold a meeting to resolve the differences between the two ministries. Mukherjee heads the empowered group of ministers (EGoM) on 3G policy.

At the late November meeting of the EGoM, the issue appeared to have been resolved, with the defence ministry agreeing to stick to its deadline to release spectrum.

It now appears the defence services will release another 5 Mhz only in July next year, and a similar amount in September. The remaining 5 Mhz will be released only three years after Bharat Sanchar Nigam Ltd completes the alternative network it is building for for defence services.

3G services were expected to begin next July, but without spectrum -- which comes bundled with each licence -- this now appears impossible.

DoT's note has pointed out that it only has 10 MHz of spectrum available currently, and has suggested that winning bidders who do not get their allocation of spectrum immediately pay 25 per cent of the bid amount upfront and the rest when they receive the spectrum.

Under the information memorandum, the government had decided to auction out four operators for 3G, with each being given 5MHz. BSNL and MTNL has already been given spectrum to operate 3G services.

In simple terms, this means DoT would require 20 Mhz of spectrum across all circles. However, the problem came to the fore when the defence ministry made it clear that it would not be able to vacate the entire 20 Mhz of spectrum needed for 3G auctioning.

First Published: Wed, December 09 2009. 00:37 IST