Updated: 3G Auction completed after 34 days of bidding

[Honest 836]

DoT may take finmin call, hike 3G charges

10 Sep, 2008, 0043 hrs IST, ET

NEW DELHI: Successful bidders at the upcoming 3G spectrum auction may have to shell out more as spectrum usage charges. In a bid to pacify the finance ministry, the department of telecom (DoT) plans to increase the spectrum usage charges for telcos that plan to offer 3G services. The DoT’s response comes after the finmin, following an August 27 meeting, demanded that the base price for pan-India 3G radio frequencies be hiked to Rs 2,500 crore from the existing Rs 2,020 crore.

The DoT, in a counter-proposal, is learnt to have suggested that spectrum usage charges be increased by 1% every year for 3G operators rather than hike the base price by Rs 500 crore. As per the existing policy, 3G operators will not be charged during the first year and pay 1% of total revenues during the second year as usage charges.

However, if the finmin agrees with the new DoT proposal, 3G players would have to share 2% of their total revenues towards spectrum usage charges in the third year and 3% in the fourth. The proposal does not specify as to how long the DoT intends to go ahead with this 1% incremental increase formula.

At present, all mobile services in the country run on second generation (2G) radio frequencies. Currently, telcos pay between 2-6% of their total revenues as spectrum usage charges for 2G services.

According to sources, the August 27 meeting was convened by the finance ministry to find common ground with the communications & IT ministry over the recently announced 3G policy. The meeting came against the backdrop of finmin asking the DoT to put the 3G policy on hold as it was not consulted on the financial implications of the guidelines. The finance ministry had also added that DoT has contravened an earlier Cabinet decision that had stipulated that spectrum pricing be finalised by both ministries.

The finmin, during the meeting, had also asked the DoT to clarify how spectrum would be allotted to CDMA players in the 800 MHz band. As reported first by ET, the DoT has already made changes to the 3G policy and said that CDMA players would also be subject to an auction for 3G radio frequencies in the 800 MHz band.

DoT had earlier decided to allot 3G spectrum in the 800 MHz band to the CDMA player with the highest subscriber base, without resorting to auction as mandated for GSM players, provided it was willing to pay the same price that the highest GSM operator was paying in that particular circle. This gave Reliance Communications, with the largest subscriber base in all circles except Delhi and Maharashtra, the right of first refusal for offering 3G services in the 800 MHz band.

[Honest 836]

DoT amends 3G guidelines, prior experience must for new cos

11 Sep, 2008, 1946 hrs IST, PTI

NEW DELHI: The government on Thursday amended the 3G telecom policy to allow only those having a licence or experience of running such a service to apply for spectrum, while also changing norms for levy of annual spectrum fee.

The Department of Telecom (DoT) has said that any person who holds a Unified Access Service Licence (UASL) or Cellular Mobile Telecom Service Licence or who has previous experience of running 3G telecom services can bid for spectrum.

DoT has already started the process of appointing an agency to conduct auction of spectrum and by September 30, the agency will be in place. For those with experience of running 3G, the new condition mandates that they give an undertaking to obtain UASL as per DoT guidelines. This means that non-licence holders for 3G spectrum would have to pay Rs 1,651 crore as pan-India fee.

As far as annual spectrum charges are concerned, DoT has amended the norms and now the companies would have to pay the charges at the rate of one per cent on the "incremental revenue due to 3G services" after a period of one year and the method for this shall be notified separately.

Similarly in the Broadband Wireless Access (BWA) services also, the DoT has amended the guidelines and introduced new frequency band of 2.3 GHz band in addition to the previously notified 2.5 GHz band for spectrum allocation.

It also changed the roll out obligations for BWA services and removed the clause of covering specific areas at the end of two years from spectrum allocation date and retained only five years periodicity for fulfilling obligations.

[Honest 836]

DoT amends 3G, WiMax policies

12 Sep, 2008, 0302 hrs IST, ET

NEW DELHI: The Department of Telecom (DoT) on Thursday amended the 3G policy to allow successful foreign bidders to acquire Indian operators without waiting for the mandatory three years.

Another key change in the policy is that CDMA operators will be allotted 3G spectrum through auction. DoT has also retained an earlier clause that besides the existing licence holders only those telcos with experience in providing 3G services can bid for the spectrum.

DoT also amended the broadband wireless access (which includes WiMax services) policy to double the base price for WiMax spectrum to Rs 1,010 crore and allow successful bidders to offer both data and voice services.

While announcing that the 3G spectrum for CDMA operators in the 450 MHz and 1,900 MHz bands would be allotted through auction, DoT said the reserve price for such frequencies would be notified separately. The department also shied away from specifying the licence renewal fee for existing telcos.

The licences of existing telcos would be extended “in a manner as the government deems fit”, it said. Again, while saying telcos must share 1% of their incremental revenues from 3G services as spectrum usage charges, DoT added that the method of calculating this fee would be spelt out later.

ET had first reported all these major changes across different stories over the last 30 days.

In the case of Wireless broadband (WiMax) spectrum, the DoT has doubled the base price for the auction of frequencies on this platform. This implies that any player that wants to bid for WiMax spectrum will now have to offer a minimum of Rs 1,010 crore for a pan-India licence compared to Rs 505 crore earlier.

Industry sources said that with the doubling of the WiMax spectrum base price, successful bidders, including internet service providers (ISPs), would now be permitted to offer mobile services on this platform. This could not be independently confirmed. But while the old policy said spectrum will be auctioned for “data services”, the amended policy has done away with it.

The new BWA policy also adds that radio frequencies in the 700 MHz and 3.3-3.6 GHz frequency bands would be auctioned for WiMax services as and when they become available. The earlier policy said that radio frequencies would be given only in the 2.5 GHz and 2.3 GHz bands for WiMax services.

DoT in its new 3G policy has said that the existing merger norms will apply only to existing licence holders. This implies that foreign telcos, which are successful in their 3G bids, can now buy an existing licence holder without having to wait for three years, the lock-in period specified earlier.

The larger implication is that foreign telcos who bag 3G licences can now buy out existing operators who hold 2G radio frequencies. They will, therefore, be able to offer both 3G and 2G services. Besides, if a foreign player were to bag 3G spectrum and also buy an existing Indian operator, the telco will not have to pay an additional Rs 1,651 crore for the UASL licence.

The government, in its earlier 3G policy announced in August, had decided to allot 3G spectrum in the 800 MHz to the CDMA player with the highest subscriber base, without taking resort to auction as mandated for GSM players.

This was on the condition that the CDMA player would have to pay the same price that the highest GSM operator was paying in a particular circle. This gave RCOM, which has the largest subscriber base in all circles, except Delhi and Maharashtra, the right of first refusal (RoFR) for offering 3G services in the 800 MHz band.

This band is the most efficient and cost-effective frequency for CDMA players to offer high-end services. The change in the policy implies that other CDMA players such as Tata Teleservices, Shyam, BSNL and MTNL as well as new players now stand a chance to get radio frequencies in the coveted 800 MHz band.

[Honest 836]

DoT unveils norms to select agency for 3G, WiMax bid

13 Sep, 2008, 0341 hrs IST, ET

NEW DELHI: The department of telecom (DoT) on Friday issued a revised request for proposal (RFP) to select an e-auction agency that will conduct the online auctions for third generation radio frequencies in India.

All interested firms have been asked to submit their bids by September 25.

All firms bidding to be the agency to conduct the e-auction will also have to declare their shareholding pattern — both Indian and foreign (if any).

Besides, the DoT has said that potential bidders cannot have more than 10% stake in any telecom or internet service provider in India. The guidelines also add that only those companies who have a paid up capital of Rs 2.5 crore and a networth of at least Rs 10 crore and has conducted similar auctions before will be eligible to apply.

The DoT has said that the auctions of third generation radio frequencies for telcos will be held within three months of selecting the agency to conduct the same. This implies, if the agency in selected by October, the auctions must be conducted before January, 2009.

Following the first round of auctions, the agency will also have to conduct subsequent auctions as and when radio frequencies are available, the DoT added. All bidders must also quote their fee for conducting the entire auction process. The fee will be the per cent of the of the total revenues they raise from the auction.

“All applicants that meet the eligibility criteria will have to make a presentation before the evaluation committee demonstrating their experience and capacity to conduct the auction,” DoT said in a communication on its website.

The department of telecom (DoT) has started discussions on allowing telcos to share spectrum, the radio frequencies on which all mobile services operate.

In a meeting with the minister of state for communication and IT, Jyotiraditya Scindia, earlier this week, the DoT officials listed out the pros and cons of becoming the first country in the world to allow spectrum sharing.

In an internal note that was presented to Mr Scindia the DoT said that spectrum sharing would help telcos use radio frequencies in a ‘more economic and efficient manner’.

The note also adds that the sharing of radio frequencies between different operators would ‘boost transparency by revealing the true opportunity cost of the spectrum’ and would also make it ‘possible for companies to expand more quickly’ in addition to ‘making it easier for prospective new market entrants to acquire radio frequencies and launch operations’.

“Spectrum sharing can also be used to correct inefficiencies arising from the allocation of spectrum to different applicants, which can create artificial spectrum scarcity,” the note said.

According to sources, the DoT may ask telecom regulator Trai to look into this issue and frame norms for it. The regulator in an earlier recommendation had pointed out that sharing or pooling of spectrum was a complex model of infrastructure sharing that cannot be successful without close association and coordination between different mobile companies.

At the same time, the DoT in its internal that was presented to Mr Scindia has also listed out five disadvantages if spectrum sharing is allowed, including loss of revenues to the government, interference between the mobile services provided by different operators which impact the quality of services and existing regulations which state that radio frequencies cannot be shared or transferred.

Additionally, the DoT has also said that if spectrum sharing were to be allowed, it is possible that ‘some operators may accumulate considerable amount of radio frequencies and start driving the market’.

Currently, radio frequencies are allotted to operators based on their subscriber base. This implies, every time, operators reach a pre-defined subscriber base in a given circle, they are given an additional radio frequencies.

Spectrum or radio frequency is a scarce resource, which is considered as the lifeline of mobile services.

Limitations in the availability of this resource has prevented many operators from expanding their operations to more circles, delayed the roll-out of 3G services in India and has also resulted in deterioration in the quality of telecom services, especially in the metros.

Existing Indian regulations allow telcos to share both active infrastructure which includes as antenna, feeder cables, node B, backhaul and transmission equipment and also the passive part which means physical sites, buildings, shelters, towers, masts, power supply and battery backup.

While passive sharing enables telecom companies to share over 30% in both capex and opex spending, this figure touches the 50% when active infrastructure is also shared.

[Honest 836]

DoT snubs FinMin, retains reserve price for 3G spectrum

14 Sep, 2008, 1642 hrs IST, PTI

NEW DELHI: The Department of Telecom has ignored Finance Ministry's suggestion to raise the reserve price of spectrum for 3G mobile services to Rs 2,500 crore, saying the auction process would discover the best price.

"DoT has carefully considered the suggestion ofthe Ministry of Finance to raise the reserve price from Rs 2,200 crore to Rs 2,500 crore but maintained the status quo since the ascending order auction would in any case discover the price in consonance with market conditions, DoT sources said.

The Ministry of Finance held a meeting with the senior officials of the Telecom Commission recently and raising the reserve price was one of the major issues discussed. According to sources, DoT has already incorporated rest of the amendments suggested by the Ministry of Finance.

The DoT has, however, suitably incorporated the change in the annual spectrum usage charge for 3G services and it would be at the rate of one per cent on the incremental revenue due to 3G mobile services. On this also, the DoT is planning to have a detailed discussions with all the stakeholders like telecom operators for evolving a formula for fixation of annual spectrum charge.

Sources close to the development said that DoT may consider segregation of revenues generated from 2G and 3G services separately to work out the annual spectrum usage charges. Sources said that this would be necessary to maintain transparency in disclosing the revenues from their different services for the purpose of working out annual spectrum usage charge and licence fee paid by telecom service providers to the government.

Even as the DoT has initiated the process to appoint an e-agency to conduct the auction of spectrum for 3G services, the government would also simultaneously work on these issues and may incorporate changes in the guidelines shortly.

The government is looking at generating close to Rs 40,000 crore from the auctioning of spectrum for 3G services. Earlier, the ministry of finance had complained that it has not been consulted on DoT guidelines on auction and allotment of spectrum for 3G and WiMax telecom services.

However, responding to it,the Telecom Secretary Siddartha Behura had also shot off a strongly worded letter last month to the Finance Secretary for questioning the procedure for 3G guidelines, saying the policy announcement was made after due consultations and there was no departure from the Cabinet decision.

[Honest 836]

Foreign telcos can’t launch 3G services with 5 MHz: DoT

16 Sep, 2008, 0055 hrs IST, ET

NEW DELHI: Amidst tall claims from both communication minister A Raja and the government that India’s 3G policy was friendly towards all players, the department of telecom (DoT) has officially admitted that it would not be possible for foreign telcos to launch 3G services with a mere 5 MHz of spectrum. DoT secretary Siddarth Behura and the department’s wireless advisor R P Agarwal have communicated this to junior telecoms minister Jyotiraditya Scindia in a letter dated September 9.

The 3G policy announced by Mr Raja in August states that a telco can bid for a maximum of 5 MHz of 3G radio frequencies.

“It may be mentioned that 15 MHz in 2.1 GHz band is ideally required for 3G services. However, for proper growth, planning of 3G networks 10 MHz shall be for practical purposes needed. As only 5 MHz is presently available and in order to have adequate competition in a service area with 4-5 players, it has been decided to allot 5 MHz,” the DoT’s wireless advisor Mr Agarwal said in his reply to Mr Scindia. The minister had sought clarity from the DoT on how foreign players could launch 3G services under the existing policy.

New players, which include international communication majors, need at least 10 MHz to launch 3G services as they also require additional start-up spectrum while existing telcos need only 5 MHz to migrate to 3G.

DoT secretary Siddarth Behura, while acknowledging that 5 MHz would not be enough has, however, told Mr Scindia that foreign telcos have three options: First, wait in line for 2G spectrum after acquiring a UASL licence. Second, foreign telcos can acquire up to 74% in any of the existing 2G licence holders and third, they could merge with an existing player. Mr Behura also said that that the merger norms were recently amended to enable this to happen.

Last week, the DoT had amended its 3G policy and said that the existing merger norms will apply only to existing licence holders. This implies foreign telcos, which are successful in their 3G bids, can now buy an existing licence holder without having to wait for three years, the lock-in period specified earlier. The larger implication is that foreign telcos who bag 3G licences can now buy out existing operators who hold 2G radio frequencies. However, industry experts say that despite relaxing the merger norms, foreign telcos will still find the going tough — this is because, existing 2G licence holders such as Datacom, Swan and Unitech amongst others are demanding astronomical valuations.

[Honest 836]

Differences crop up on 3G procedure, may delay rollout

17 Sep, 2008, 1427 hrs IST, PTI

NEW DELHI: Betraying differences within the department on foreign companies bidding for 3G spectrum, Minister of State for Communication Jyotiraditya Scindia feels the current procedure may impede the entry of American firms.

Scindia has asked for information on whether US operators, who have evinced interest in the Indian telecom sector, can start 3G operations using the standalone 5 MHz spectrum.

The Department of Telecom has acknowledged that 5 MHz is not enough for foreign telcos to start services, sources close to the development said. The US players want DoT to allow them to bid as 100 per cent foreign entities or give them a minimum of six to seven months after announcement of bidding details to enable them form JV with Indian firms before the spectrum is auctioned.

This, if allowed, can derail the 3G process rolled out by the government and further delay launch of the much awaited next generation mobile services in India. Amendments made by DoT to the guidelines on companies that can offer 3G mobile-phone services said that new entrants would have to pay an additional Rs 1650 crore to acquire a basic licence in addition to the money they bid for spectrum needed to offer 3G services.

The foreign telecom operators who are interested in entering India's market to provide 3G telecom services have to shell out Rs 3,700 crore more than the existing license holders.

As per industry estimates, for a newcomer the cost to operate pan-India 3G, including UAS licence fee, 3G spectrum and equipment and infrastructure and transmission, would be about $4 billion (over Rs 17,000 crore). While for an incumbent, who already holds a UAS licence, it would be little over $3 billion or Rs 13,000 crore.

US companies feel this policy forces them to enter as a new comer and pay at least twice as much as incumbent operators for 3G services. Moreover, the present M&A rules allow the 3G new comers to acquire incumbent 2G operators.

But, the self assessed exorbitant valuation by the new 2G operators are further complicating the market entry process. Once a potential Indian partner or a 2G operator agrees and signs formation of a JV with an US partner, India's Foreign Investment Promotion Board (FIPB) would have to approve the JV - a process that could take anywhere between 3-5 months - before it would be eligible to bid in the 3G auction.

Keeping this in mind, the US companies have approached the government seeking more time to make business case before committing huge investments in the auctioning of 3G spectrum.

[Honest 836]

DoT leeway for foreign telcos in 3G bidding

18 Sep, 2008, 0129 hrs IST, ET

NEW DELHI: The department of telecom (DoT) is examining a proposal that will help speed up the entry of foreign telecom companies so they can participate in the upcoming auction of 3G spectrum.

The proposal aims to allow foreign telcos to bid as 100% entities. If successful, the telcos would be given a specific time frame to find an Indian partner and get the mandatory clearance from the Foreign Investment Promotion Board (FIPB).

Indian regulations don’t allow foreign telecom players to hold more than 74% stake in any firm that offers communication services in the country. But with the first round of 3G spectrum auction just a month or two away, foreign players such as AT&T, NTT DoCoMo and Verizon have told DoT that it will not be possible to enter into JVs with Indian partners at such short notice.

Foreign telcos also want to avoid the possibility, where, after having tied up with Indian partners, they fail to bag 3G spectrum and then disband their JVs. Additionally, international communication majors have told DoT that since the auction details are yet to be announced, there is no case to convince an Indian partner to commit investments in telecom.

ET has learnt that the junior telecom minister Jyotiraditya Scindia has asked the DoT to consider the option of letting foreign telcos bid as 100% entities. International telcos had approached Scindia on this issue and the minister has forwarded their concerns to the DoT, a source added. If this proposal is accepted, foreign telcos will not have to seek FIPB nod for placing their bids.

Again, as first reported by ET earlier this week, Mr Scindia had also asked the DoT to clarify as to how foreign players could launch 3G services under the existing policy which entitles a player to only 5 MHz of 3G frequencies. DoT secretary Siddharth Behura, while acknowledging that 5 MHz would not be enough has, however, told Mr Scindia that foreign telcos have three options: First, wait in line for 2G spectrum after acquiring a UASL licence.

Second, foreign telcos can acquire up to 74% in any of the existing 2G licence holders and third, they could merge with an existing player. Mr Behura also said that that the merger norms were recently amended to enable this to happen.

Just last week, the DoT had amended merger norms in the 3G policy to enable foreign telcos, which are successful in their 3G bids, to buy an existing licence holder without having to wait for three years, the lock-in period specified earlier. This will allow foreign telcos who bag 3G licences to buy out existing operators who hold 2G radio frequencies and offer a complete range of services.

However, industry experts say that despite relaxing the merger norms, foreign telcos will still find the going tough. This is because the existing 2G licence holders such as Datacom, Swan and Unitech and others are quoting astronomical valuations. Experts say that the government stands to lose revenues as it gave it away pan-India 2G licences recently for Rs 1651 crore ($400 million) to these new entrants, who in turn are selling it at valuations that are multiple times their entry fee.

[Honest 836]

US meltdown may affect 3G bid / Global cos may shun 3G auctions

18 Sep, 2008, 0706 hrs IST, ET

NEW DELHI: The meltdown of Wall Streets blue-blooded banks and the growing fear that the contagion will spread to some European banks could directly impact India’s upcoming 3G spectrum auctions by keeping away global bidders.

The absence of global players is expected to seriously restrict the value of the bids placed for 3G spectrum, which jeopardizes the government’s Rs 40,000 crore revenue target from this spectrum sale.

Typically, it is large global banks like Lehman Brothers and Merrill Lynch that are intimately involved in supporting the financial bids of both existing operators and new entrants. They also have a strategic role in the M&As that follow such bids.

With the weakening of the financial sector and a general nervousness around money supply, it is highly likely that even if global telcos do participate, the bidding will be far more conservative than it would have been under normal circumstances.

“The financial meltdown is at its peak. India’s 3G auctions could not have come at a worse time. The weakness in financial markets is bound to impact bidders confidence”, a leading global banker told TOI.

Apart from the fundamental weakness in financial markets, these international banks have very close relationships with global telecom service providers where long term debt, bridge loans and IPO’s are concerned. With the collapse of these banks, many global telcos have started tightening their belt and frozen future investments, M&A’s and even hiring.

“The entire sentiment is negative. Don’t expect global telecom service providers to swim against the tide and put out massive bids in a market like India which is already littered with regulatory uncertainties”, says a global telecom operator whose company has been in the Indian market for investments for nearly two years.

The weakness of foreign banks and global financial sector is also expected to move the Indian banking sector to a more conservative approach for funding debt which will be critical to the post-bidding rollout scenario.

“Overall, the sentiment of telecom investments during and post the 3G bidding will be intimately linked to the scale of the unfolding financial crisis”, says a telecom analyst.

Telecom minister, A Raja’s 3G guidelines, announced on August 1, 2008 proved to be a dampener for global telcos who said they would not participate on account of discriminatory financial entry barriers among other issues.

This forced the DoT to revise the spectrum guidelines for both 3G and Broadband Wireless Access spectrum. Companies are currently studying the full impact of such revisions. It seems that the crisis faced by the global banking sector is definitely an unwelcome move that will adversely impact India’s exchequer revenues.

[Honest 836]

Foreign telcos can bid for 3G without Indian partner

18 Sep, 2008, 1452 hrs IST, PTI

NEW DELHI: Government today said it will allow foreign telcos to bid on their own without a domestic partner for the 3G spectrum but they have to find a local player before starting services.

As per the Indian laws, foreign companies can own up to 74 per cent stake and thus they would be required to form a joint venture with an Indian company before starting the services, Telecom Secretary Siddharth Behura told reporters here.

"The foreign telcos can bid on their own for the 3G spectrum but before rolling out services they should find an Indian partner," he said.

The foreign players want DoT to allow them to bid as 100 per cent foreign entities or give them a minimum of six to seven months after announcement of bidding details to enable them form JV with Indian firms before the spectrum is auctioned.

This, if allowed, can derail the 3G process rolled out by the government and further delay launch of the much awaited next generation mobile services in India.

However, Behura assured that the auction process would be on time.

Amendments made by DoT to the guidelines on companies that can offer 3G mobile-phone services said that new entrants would have to pay an additional Rs 1,650 crore to acquire a basic licence in addition to the money they bid for spectrum needed to offer 3G services.

The foreign telecom operators who are interested in entering India's market to provide 3G telecom services have to shell out Rs 3,700 crore more than the existing licence holders.

[Honest 836]

We will decide on spectrum sharing in 2 mths: Scindia

20 Sep, 2008, 0000 hrs IST, ET

NEW DELHI: The government may allow telcos to share spectrum and a decision on this will be will be taken within two months, junior telecom minister Jyotiraditya Scindia said at an Assocham event here on Friday. Indian regulations allow telcos to share all infrastructure except radio frequencies. While spectrum sharing is not permitted in any country globally, this is seen as a feasible option to address the crunch and enable more players to enter the telecom space.

Countries such as the US, however, allow operators to trade spectrum.

Mr Scindia’s comments, however, contradicts the views expressed by telecom secretary Sidhharth Behura. Just a day ealier, Mr Behura had said that the DoT was not considering any such proposal: “I am not aware of any such development,” he had said. Even as Mr Behura denied any such development, ET has learnt that Mr Scindia has already held a round of discussion with the DoT on the issue of spectrum sharing last week. DoT in an internal communication last week had listed out the pros and cons of becoming the first country in the world to allow spectrum sharing.

[Honest 836]

3G auction may not fetch Rs 40,000 cr

21 Sep, 2008, 1515 hrs IST, PTI

NEW DELHI: Finance Ministry's hopes of garnering about Rs 40,000 crore from the sale of spectrum for 3G mobile services may be dashed as most of the operators are unlikely to bid beyond the reserve price of Rs 2,200 crore.

According to assessments within the Department of Telecom, maximum 5-7 operators would bid for 3G spectrum and the amount would remain within Rs 2,200-2,500 crore.

Going by this, the government is likely to get a maximum of Rs 17,500 crore in stead of an earlier estimate to raise Rs 40,000 crore from the auction leaving a gap of over Rs 20,000 crore.

Sources said any pan-India bid beyond Rs 2,500 crore would make the operations financially unviable and services costlier to the subscribers.

Although the DoT had earlier earmarked 60 MHz spectrum for 3G mobile services to accommodate 10-12 service providers, but sources said maximum seven operators are likely to put in bids, including two international players.

In fact, keeping this in mind the Finance Ministry had earlier asked DoT to consider increasing the reserve price to Rs 2,500 crore from Rs 2,200 crore but the proposal was turned down by DoT saying ascendingorder of auctioning process would automatically give market determined price.

Source in department said all five leading cellular operators Bharti Airtel, Vodafone-Essar, Idea Cellular, Reliance Communications and Tata Teleservices are likely to put their bids while the scenario among the international players is not yet clear.

US-based AT&T is a potential candidate to bid for 3G spectrum but would have to form a joint venture with an Indian entity before rolling out the services as permitted by the FDI guidelines.

The government has already started the process to appoint e-auction agency to conduct auctioning and hopes to end the process by end of November this year, senior DoT officials said.

Asked how many licences are likely to be issued, officials declined to comment saying Communication and IT Minister A Raja had announced 10-12 players and the DoT still maintains it.

Officials said enough spectrum would be available with the DoT to give 5MHz spectrum each to all successful candidates for 3G services. Going by the schedule prepared by the DoT, 3G services should start in the first quarter of next financial year by the private players while the PSUs BSNL and MTNL have already announced their plans to start services from December this year.

[Honest 836]

DoT may set user base rider for 3G spectrum auctions

22 Sep, 2008, 0137 hrs IST, ET

Tougher norms

New second generation (2G) telecom entrants Swan, Loop, Datacom, S Tel, Loop Telecom and Unitech may find their valuation plans going awry. ET has learnt the finance ministry wants tighter norms for third generation (3G) spectrum auctions.

The ministry will ask the department of telecom (DoT) to allow only those Indian companies to bid for 3G which have an active subscriber base. Current norms allow foreign telcos to participate in 3G auction only if they furnish experience certificates, but this does not apply to Indian telcos. This means companies like Swan, Datacom and Unitech can bid for 3G spectrum along with existing operators such as Bharti, Vodafone and Reliance Communications, despite the new players having no experience in providing telecom services.

A senior government source told ET: “The finance ministry may question DoT on the logic behind allowing a January 2008 2G licensee to bid for 3G spectrum, when it has not rolled out a single base transceiver station or acquired even one customer, let alone having 3G experience. The ministry feels the current policy encourages a newbie to buy 2G spectrum from DoT at a fixed price and auction it to a foreign player at a much higher price.

Had 2G spectrum been auctioned, the revenue would have accrued to the public exchequer. Instead, the money is being allowed to enrich private pockets at the expense of a looming fiscal deficit.”

However, it is not known if DoT will further tighten 3G norms as sought by the finance ministry. Recently, DoT had turned down the ministry’s demand to raise the base price for pan-India 3G radio frequency to Rs 2,500 crore from Rs 2,020 crore now. At the same time, DoT, over the past two weeks, has taken many steps to speed up the entry of foreign players who want to bid for 3G spectrum. Last week, as first reported by ET, DoT said that it would allow foreign telcos to bid for 3G spectrum as 100% entities. This implies a foreign player will not have to tie up with an Indian JV partner and seek clearance from the Foreign Investment Promotion Board (FIPB) to participate in the upcoming 3G auctions.

DoT had earlier amended merger norms in the 3G policy to enable foreign telcos, which successfully bid for 3G spectrum, to buy an existing licence holder without having to wait for three years — the lock-in period specified earlier. Industry experts, however, said that the amendments would only help push up valuations of new 2G entrants. This is because these players, realising the 3G spectrum winners need to get a universal access service licence with 2G spectrum, can literally demand the moon in terms of valuation, posing an entry barrier to the foreign player. In such a case, the new 2G entrants would hawk their licences at a premium without a single subscriber and no 3G experience.

Little wonder then that despite the recent round of amendments to the 3G policy, there is still a view in government circles, especially the finance ministry, that the 3G auction guidelines continue to pose several entry barriers to foreign players. “It effectively means a foreign player would need to shell out well over $500 million to operationalise its 3G spectrum. This shows the current 3G policy is skewed against foreign players, who may feel discouraged to participate in the upcoming 3G auctions.

These players are looking at the prospect of locking in billions of dollars without the certainty of being able to operationalise their 3G spectrum. If things indeed come to such a pass, the government’s target of garnering Rs 40,000 crore from 3G auctions may remain a pipe dream. In their present form, the 3G auction guidelines seem tailor-made to help realtors and speculators make a killing,” said a top official close to the finance ministry.

[Arun 795]

India 3G: No easy path for foreign telecoms

09.21.08, 11:06 PM ET

Reuters

Foreign telecom firms could gain access to India's booming mobile market through a global auction of 3G licences this year, but low call rates and established players mean it could take years to turn a profit.

Foreign telecoms with 3G experience are allowed to bid at the auctions, opening the way for firms such as AT&T, Etisalat, NTT Docomo to gain a foothold in the world's fastest-growing mobile market.

But India's 2G operators, including Bharti Airtel, Reliance Communications, Vodafone Essar and TM International backed Idea Cellular, are not going to cede their territory easily.

"There will be a mad fight," said Madhusudan Gupta, a Singapore-based analyst with research firm Gartner, which sees Indian mobile users rising to 737 million by 2012 from nearly 300 million now, with 20 percent of those using 3G.

"You have a long queue of foreigners. The potential is enormous in India."

Five 3G licences will be available for most of India's 22 service zones, although limited spectrum means there will be a maximum of three in large cities such as New Delhi and Mumbai.

Next-generation high-end 3G services give users a chance to enjoy fast Internet access, games and a host of multimedia content from maps to music on their cellphones, areas where 2G has been handicapped by a slower data transfer capability.

India's mobile user base increased by 25 times between 2002 and 2007, but a winning bid will not be a licence to print money, especially for a new entrant up against India's cheap call rate model.

Local call rates are less than 1 U.S. cent a minute, and local operators want to implement the same style of model in 3G.

"In India tariffs have to be where Indian tariffs are," said Sunil Mittal, chairman of top mobile firm Bharti. "The idea in India is to provide telecom services at most affordable rates."

3G IS NOT EASY

The low-cost plans will be a challenge given 3G has been associated with high-tariff structure globally, as new operators have to put up billions of dollars for licences and networks.

India has set a base price of 20.20 billion rupees ($435 million) for a national licence. Actual bids are expected to be higher, especially in lucrative centres such as Mumbai and New Delhi, as the government is looking to raise up to $9 billion.

Foreign telecom firms not already in the Indian market will also have to fork out 16.5 billion rupees ($355 million) for a telecoms licence, which the existing operators already have.

"It is not going to be a cakewalk. It will be kind of a Catch-22 situation. You will have to spend so much, but you can not pass on in the same proportion," said Gartner's Gupta.

"At the end of the day, price will matter."

Importantly for new entrants, a winning 3G bid does not automatically get a bread-and-butter 2G licence.

T.V. Ramachandran, an official at a mobile operators' association, COAI, says new foreign operators will have to look for an Indian partner that owns a 2G network.

"It will be most difficult for pure 3G operators. Otherwise, I feel there will be initial years of losses, which is bound to be there in every business. But as we started late, we have a great advantage."

New 2G licencees such as Unitech, Datacom and Loop Telecom could be targets for foreigners, although Indian policy at present does not allow two 2G licence holders to merge their licences for three years from issue.

Billions of dollars of investment in upgrading or building new 3G network would spell more opportunity for global network gear makers such as Ericsson, Nokia, Siemens, Motorola and Chinese firms Huawei and ZTE Corp

INTERNATIONAL EXPERIENCE

Overseas, 3G has failed to deliver on the hype that often led to frenzied licence auctions.

Hong Kong's Hutchison Whampoa has struggled since launching 3G services in Britain in 2003, and Vodafone ended up selling its underperforming Japanese 3G unit to Softbank in 2006.

In South Korea, SK Telecom Co and KTF Co have been offering 3G services for more than a year, but high costs associated with subsidies for new phones and marketing has been a worry for 2G market leader SK.

Singapore's three operators -- Singapore Telecommunications Ltd, StarHub Ltd and MobileOne Ltd -- rolled out their commercial 3G services in early 2005, but are yet to turn profitable on their 3G investments, analysts say.

But the COAI's Ramachandran said India's size and growth potential gave it advantages over others. If 10 percent of users migrated to 3G, that would make a good business case, he said.

"Foreign players have a deep pocket. But clearly the existing Indian operators have an overlay," said Alok Shende, principal analyst at Accendia Consulting.

"But something one should understand. They have the licence for 20 years, not for 2-3 years. So it's not that they have to make all the money tomorrow."

[Honest 836]

DOT in talks with defence for release of spectrum: Raja

24 Sep, 2008, 1342 hrs IST, PTI

NEW DELHI: Telecom Minister A Raja on Wednesday said his ministry is in talks with the Defence Ministry for releasing spectrum from the armed forces for civilian communication use.

"The talks are being held with the defence ministry for release of spectrum. The National Security Advisor is on the job. Probably by next month, we are going to meet," he said on the sidelines of a telecom summit here.

However, a senior DoT official said that the defence ministry too does not have much spectrum that it can spare.

The 1800 and 900 MHz band (the most used spectrum band in mobile telephony) have been fully exhausted. "We have also given some spectrum on trial to new operators in south India," the official said.

"It is very difficult to get any spectrum for Delhi or Mumbai, as these heavily populated metros have utilised all the available spectrum," he said.

DOT expects defence to release at least 25-30 MHz of spectrum for 3G services. The original demand from DoT to defence was for 45 MHz, which has now been scaled down to 25-30 MHz.

[Honest 836]

Four firms bid for 3G e-auction agency

25 Sep, 2008, 2017 hrs IST, IANS

NEW DELHI: Four information technology firms Thursday submitted bids for selection of an e-auction agency that will conduct online auctions for third generation radio frequencies in India, an official said here.

"Only four companies - mjunction, Rothschild, MSTC Ltd and Sai Information System - have submitted their bids with us today," a Department of Telecom (DoT) official told reporters.

The interested firms were required to submit their bids by Sep 25.

According to DoT guidelines, all the firms bidding to be the agency to conduct the e-auction will have to declare their shareholding pattern - both Indian and foreign firms, if any.

Besides, the DoT has said potential bidders cannot have more than 10 per cent stake in any telecom or Internet service provider in India.

Under the guidelines, only those companies which have a paid-up capital of Rs.25 million, a net worth of at least Rs.100 million, and have conducted similar auctions before will be eligible to apply.

"All applicants that meet the eligibility criteria will have to make a presentation before the evaluation committee demonstrating their experience and capacity to conduct the auction Monday, September 29," DoT official said.

While the covering letter was opened Thursday, the government will declare the eligible bidders Friday. The eligible bidders will make presentations before the DoT evaluation committee Sep 29.

The finalisation and declaration of technical bids will be Oct 1, to be followed by the opening of financial bids Oct 3. The bids are to be finalised by Oct 6.

The DoT had earlier said the auctions of 3G radio frequencies for telecom operators will be held within three months of selecting the agency to conduct the same. This implies, if the agency in selected by October, the auctions must be conducted before January, 2009.

[Honest 836]

3G, WiMax auctions to be held simultaneously

Business Line

Move aimed at curbing chances of manipulation by operators.

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Bidding moves

The Government wants to ensure that it gets aggressive bids for both streams of radio frequencies

RCom, Tata Tele and Aircel are looking at deploying WiMax technology in a big way

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New Delhi, Sept. 25 In a bid to cut out the possibility of any manipulation by operators, the Department of Telecom has decided to conduct simultaneous auction for third generation mobile services and broadband wireless technologies such as WiMax.

Earlier, the DoT was planning to conduct the auction sequentially by first putting 3G spectrum on the block followed by WiMax.

According to DoT officials, the decision to conduct simultaneous auction was taken so that the operators are not given an opportunity to speculate or try to get any undue advantage during the bidding for WiMax spectrum. The move will also ensure that the Government gets aggressive bids for both streams of radio frequencies given the uncertainty of the end result during the auction.

“If 3G auction is conducted first, then there is a possibility that the WiMax bids will not be as high as we expect it to go. By conducting the auction together, we are eliminating the chances of any manipulation,” said a senior Government official

Officials said that since most of the operators would want a piece of either 3G spectrum or WiMax to sustain their business in the future, they would go all out for acquiring at least one of the two in a simultaneous process. If the auction was done sequentially, then some of the operators may have had the option to skip the 3G auction altogether and then participate in WiMax auction assuming that a few companies which win 3G may not be interested or have the money power to take part in another round of bidding.

That would have meant less competition, allowing the operators to take away the WiMax spectrum with much lower bids. Simultaneous auction, on the other hand, raises the uncertainty levels, which, in turn, will make the auction for both 3G and WiMax equally aggressive.

WiMax vs 3G

While WiMax is known to have potential similar to 3G technology in terms of the type of services and speed, globally, it is currently being deployed primarily for data services, including wireless broadband.

However, technology companies such as Intel are investing in developing standards that will enable WiMax operators to carry voice calls soon. Handset makers such as Motorola are also developing hand-held devices that are expected to rival 3G phones. Market watchers expect telecom players to offer voice services using WiMax technology within a matter of 6 months to a year.

Since DoT has already allowed WiMax to be used for both data and voice services, it is not much different from a 3G licence. A sequential bidding would have allowed some companies the option of not bidding for 3G given its higher base price compared to that of WiMax. While 3G bidders will have to pay at least Rs 2,020 crore for pan-India spectrum, operators who win WiMax spectrum will have to pay only Rs 1,010 crore.

Operators including Reliance Communications, Tata Teleservices and Aircel are looking at deploying WiMax technology in a big way.

However, since the bids will be invited circle-wise, DoT can conduct simultaneous auctions only in areas where it has spectrum for both technologies. In other circles, the auction will have to be done sequentially.

The status on this will only be known once the defence forces start releasing spectrum. Industry observers said that in areas where spectrum for both are not available immediately, DoT could conduct the auctions one after the other as long as the time gap between the two is at least six months to keep the playing field level.

[Sadikk 301]

This is first time in India, corporates are on their knees to roll out services, getting spectrums ETC.

They hate government for this, they use to buy NETAS policy in past, not now.

Good.

[Honest 836]

Spectrum: Need to have open market based method stressed

26 Sep, 2008, 1715 hrs IST, PTI

BANGALORE: FICCI President Rajeev Chandrashekhar has stressed the need for having an open market based method to establish value of spectrum that government from time to time gives to private sector for operating various services, so that exchequer does not lose out.

In a letter to Prime Minister Manmohan Singh Chandrashekhar, MP from Bangalore, said since spectrum was an asset of the government and the people of India, it must be commercially compensated at the market value when it was being transferred to another entity or company.

His reaction came after Swan Telecom's valuation created "jitters" leading to questions being raised on the low pricing of USD two billion of 3G Spectrum by the Telecom department.

"The transaction clearly established irrefutable eveidence that the government's pricing for Spectrum of 4.4 MHz was far lower than the actual market value causing considerable loss to the exchequer", he said.

There is a need for a comprehensive public policy when it comes to commercial terms of moretisation of public assets like spectrum, minerals and natural resources so that the exchequer gets it due, Chandrashekhar said.

He pointed out that arbitrage between the value that the government was receiving from spectrum and the actual market value was to the tune of around Rs 8,000 to Rs 9,000 crore.

On a base price of nationwide spectrum of approximately Rs 1540 crore, this was an appreciation in the hands of private sector of almost 600 per cent in a few months, Chandrashekhar said.

[Honest 836]

DoT shortlists 3 as eligible bidders for 3G e-auction agency

26 Sep, 2008, 1915 hrs IST, PTI

NEW DELHI: The Department of Telecom (DoT) has shortlisted N M Rothschild & Sons, Sai Info System and mJunction as the eligible bidders for e-auction of spectrum for 3G and broadband wireless services.

Based on the information available on their covering letter, three bidders - Rothschild & Sons of Mumbai, Sai Info System of Ahmedabad and mJunction of Kolkata were found to be meeting the eligibility criteria, the DoT said.

These companies will now make a presentation on September 29 before DoT and the technically qualified bidders will be announced on October 1.

Two days later on October 3, the financial bids will be opened and the agency will be selected on October 6. DoT had said that even a consortium or a group of companies will be permitted to submit the bids.

Likewise, the same agency will also be responsible for auctioning of broadband wireless access or BWA services. Besides, the DoT has said that potential bidders cannot have over 10 per cent stake in any telecom or internet service provider in India.

Under the guidelines, only those companies which have a paid-up capital of Rs 25 million, a net worth of at least Rs 100 million and have conducted similar auctions earlier will be eligible.

The DoT had earlier said the auctions of 3G radio frequencies for telecom operators will be held within three months of selecting the agency to conduct the same.

This implies that if the agency is selected in October, the auctions must be conducted before January 2009.

[Honest 836]

No 3G bid sans Indian partner: DIPP

30 Sep, 2008, 0515 hrs IST, ET

NEW DELHI: The home ministry and the department of industrial policy and promotion (DIPP) have shot down DoT’s plans to let foreign telcos bid for 3G spectrum without an Indian partner. Telecom secretary Siddarth Behura had recently said that foreign telcos would be allowed to participate in the upcoming 3G auctions on their own, and added that successful bidders would be given time to find JV partners and get the mandatory clearance from the foreign investment promotion board (FIPB).

The FDI policy allows only 74% foreign investment in telecom. Therefore, foreign companies cannot do without Indian partners. DIPP officials say that allowing a foreign company to bid on its own amounts to allowing 100% FDI in the sector, thereby violating the 74% FDI norm. “This kind of flexibility is not provided in any sector and it should not be done in a sensitive sector like telecom,” DIPP sources told ET.

The home ministry is of the view that spectrum cannot be allocated to any player without security clearance for all the partners. Home ministry sources also said that the allowing stand-alone foreign firms to bid as 100% entities would imply a blanket (or blind) security clearance for both the company as well as its potential partners. “Once spectrum is allotted, it could become messy if the foreign company or its partner(s) are considered ‘undesirable’ by the government from the security point of view,’ home ministry sources said.

They also added that since security screening happens at multiple stages now––first when FDI is cleared by FIPB and again when spectrum is allocated–– it would not be possible to give this leeway to foreign telcos. The objections from both the DIPP and the home ministry is set to put DoT in a fix. It may also impact the participation of foreign telcos in the upcoming auctions. Importantly, lesser or lower participation by foreign telcos can also impact the revenues the government plans to garner from the 3G spectrum auctions.

The DoT had agreed to give this leeway to foreign telcos in a bid to speed up their entry into the Indian market. This is because, with the first round of 3G spectrum auction just a month or two away, several international communication majors had said that it would not be possible to enter into JVs with Indian partners at such a short notice. Foreign telcos had also said that they want to avoid the possibility, where after having tied up with Indian partners, they fail to bag 3G spectrum and then disband their JVs.

[Honest 836]

Rothschild wins technical bid to become spectrum auction agency

Economic Times l 01 October 2008 l New Delhi

The government has zeroed in on Mumbai-based NM Rothschild and Sons as the agency to conduct online auctions for allocating third generation radio frequencies in India, the government said.

The technical quotations of eligible bidders were opened Sep 29.

"The financial bid of the technical qualified bidder will be opened Oct 3," an official release said.

Three companies - mjunction, Rothschild and Sai Information System - had been shortlisted as eligible bidders out of the four to have submitted bids for selection as the agency to oversee the e-auction of spectrum allocation for third generation (3G) and Broadband Wirelesss Access (BWA) services.

A state-owned bidder, MSTC Ltd, did not qualify for the technical bids.

According to the Department of Telecom (DoT) guidelines, all bidders - both Indian and foreign firms, if any - were required to declare their shareholding patterns.

Potential bidders were also barred from having more than 10 percent stake in any telecom or Internet service provider in India.

Under the guidelines, only those companies with a paid-up capital of Rs.25 million, a net worth of at least Rs.100 million, and experience in conducting similar auctions were eligible to apply.

[Honest 836]

2G-3G revenue split issue threatens to delay auction process

3 Oct, 2008, 1756 hrs IST, PTI

NEW DELHI: The auction process for spectrum allocation may get delayed as differences have cropped up over the government's decision to segregate of

2G and 3G revenues.

A senior Department of Telecom official said, as part of the industry and the regulator are seeking clarification on some of the recent changes in the 3G guidelines, it could delay the auction process.

DoT cannot go-ahead with the process without clarifying the queries as it would amount to compromise on transparency, which is the purpose behind the e-auction, he said.

Telecom Minister A Raja had earlier said the auction for 3G spectrum allotment would begin by October-end, and services would roll out this year. Also, government is likely to appoint Rothschild as the agency to supervise the e-auction.

TRAI Chairman Nripendra Misra told PTI if revenues between 3G and 2G (voice telephony) were separated then that could give an opportunity to operators to adjust revenues which would cause losses to the government and not be in national interest. DoT has set up a committee which could possibly address the loopholes in this regard, so it could be a happy situation for all, he added.

Siding with Trai CDMA operators association AUSPI in a letter to DoT sought clarity on this issue.

It said "No annual spectrum charge shall be payable for 3G telecom services in the first year from the date of allotment of spectrum and the licensee shall pay annual spectrum charge of 1 per cent on the incremental revenue due to 3G services after a period of 1 year.

The method of calculation shall be notified separately. ...this contentious point has to be clarified considering that it is not possible to separate 3G services from 2G services which is fool proof and the method of calculation should establish integrated spectrum charge for the licensee for the 2G and 3G services."

[Honest 836]

Low 3G usage charge annoys MoF

9 Oct, 2008, 0028 hrs IST,ET

NEW DELHI: The finance ministry has slammed the department of telecom (DoT) for its policy to charge telcos 1% of their annual revenues as usage char

ges for 3G spectrum against higher charges for 2G radio frequencies. At present, all telecom services in the country operate on 2G radio frequencies and service providers pay 2-6% of their gross revenues to the government as spectrum usage charges depending on the area of operation. The DoT recently amended its 3G policy and said telcos will pay 1% of their gross revenues from 3G services spectrum usage charges. Besides, it said this 1% fee would only be applicable from the second year of 3G operations.

The department of economic affairs (DEA) has now told DoT that it is not possible to differentiate between 2G and 3G revenues. DEA secretary Ashok Chawla, in his communication to department of telecom secretary Siddhartha Behura, has also said that telcos would ‘artificially suppress their 2G revenues’ and pass it on as 3G as the latter enjoyed a lower spectrum fee. “The amendments wherein spectrum usage charges for 3G services are proposed to be levied at the rate of 1% of the incremental 3G revenues after a moratorium of one year is likely to create practical problems relating to segregation of revenue streams from 2G and 3G services and may also encourage creative accounting wherein 2G revenues are artificially suppressed,” Mr Chawla said.

Mr Chawla has also demanded that the communications ministry constitute a body with representatives from the DEA to look into the issue. “The group may expeditiously examine options in this regard and evolve a mutually agreeable and implementable solution which satisfies the requirements of all stake holders,” Mr Chawla’s communication added.

Additionally, the finance ministry has demanded that the 3G auctions not be delayed and be completed by December 08. The finmin’s views have been endorsed by CDMA players, who have demanded that the 3G auction be put on hold until this issue is settled. GSM players say that the policy should continue in its current format. They also claim to have a formula to differentiate between 2G and 3G revenues.

Trai had earlier warned the DoT that it won’t be possible for operators to break-up their revenues for 2G and 3G services while adding that this would result in operators not disclosing their actual revenues. The regulator had also added that the 3G policy under its current format would enable telcos to manipulate revenues. “Both the services are capable of providing triple play services. There will be many common control equipment for 2G and 3G and apportioning the cost to these two services will be a very complex and cumbersome exercise. There is also an apprehension that such bifurcation of revenues may lead to wrong booing of revenues by some of the service providers and lower spectrum charges,” Trai had told the DoT.

[Honest 836]

DoT may face dilemma to workout for 2G-3G revenue split

12 Oct, 2008, 1518 hrs IST, PTI

NEW DELHI: The Department of Telecom may find it difficult to work through the segregation of revenues between 2G and 3G due to complex splitting methods.

Even as Ministry of Finance, TRAI and CDMA operators feel the separation is tough and can give rise to revenue loss, GSM operators had told DoT that such a plan was workable, but it now appears that even COAI is finding it difficult to cite successful example for such a split.

Hong Kong, France, Greece have found the exercise quite difficult.

In a letter to its member companies, COAI Director General T V Ramachandran is believed to have said the Hong Kong model of segregation followed by OFTA (regulator in Hong Kong) was very complex and "nobody appears to be happy about it".

He even told the members that Hong Kong telcos "are probably going to go away from the system"

The visiting chairman of the French Regulatory Authority (ARCEP), Paul Champsaur, told representatives of the Indian telecom industry recently that France never implemented a differential system because of the complications involved in segregation of 2G and 3G revenues.

He, however, preferred to implement a uniform one per cent charge for both 2G and 3G. This is despite the policy makers in France proposing a differential system.