DoT opens 3G doors to new players, foreign telcos

NEW DELHI: In a move that will allow foreign players and new domestic companies to offer 3G (third generation) mobile service in India, the Department of Telecom (DoT) has said that all players can bid for up to 10 MHz of 3G spectrum (two blocks), rejecting telecom regulator TRAI���s recommendation to allow each GSM operator to bid only for 5 MHz of 3G spectrums. New players need a minimum of 10 MHz to launch third generation services as they also require additional start-up spectrum while existing telcos need only 5 MHz to migrate to 3G.

DoT in its ���draft��� 3G policy has in-principle agreed to the TRAI recommendation that 3G spectrum be auctioned in blocks of 5 MHz each, but added that each player can bid for a maximum of two blocks. Put simply, if an operator were to bid for two blocks of 5 MHz, the player will get 10 MHz of third-generation spectrum. However, existing GSM operators who only need 5 MHz of 3G spectrum to migrate to the high-end 3G service can bid for only one block.

While TRAI in its 3G recommendations had said that only existing telcos be allowed to bid for 3G spectrum, the DoT's draft 3G policy states that existing operators as well as new players and foreign telcos be permitted to bid for third generation frequencies during the auction. Indian telcos, both CDMA and GSM players, are bitterly opposed to entry of foreign players in 3G. They have even written to the DoT threatening legal action if new players are allowed to participate in the auction.

The draft policy has also made major changes to the base price for 3G spectrum bids. TRAI had recommended that the base price be Rs 80 crore for Delhi, Mumbai and other category ���A��� circles; Rs 40 crore for Chennai, Kolkata and category ���B��� circles; and Rs 15 crore for category ���C��� circles. However, the DoT has said Chennai will have the highest base price at Rs 233 crore followed by Karnataka at Rs 206 crore and Mumbai at Rs 203 crore while the entry fee for Delhi has been pegged at Rs 170.7 crore.

With regard to mergers and acquisitions in the 3G space, the draft policy on 3G states that these would not be allowed if the number of operators in a service area were to fall to four or below. Going against TRAI, the DoT has also taken steps to safeguard the interests of state-owned telcos, BSNL and MTNL. The proposed policy allows both PSUs to bid for 3G spectrum, but adds, ���If they win one of the spectrum blocks, they would get spectrum based on their bidding price.

Otherwise, one block of spectrum would be given to them at a price equal to the highest bid.��� Explained a top industry source: ���With only about 30 MHz of 3G spectrum available in most circles, if all players bid for two blocks each, then the country will have space for only three players in the 3G space.���

As 3G spectrum can be used both for voice and high-speed data applications, many foreign operators are learnt to be considering this route to enter the traditional voice and SMS segment, which is currently offered in 2G spectrum. So far, AT&T and Deutsche Telecom have evinced interest in bidding for 3G spectrum.

Last year, while announcing the 3G policy, telecom minister A Raja had said both new entrants and foreign telcos would be allowed to bid for 3G spectrum. He, however, did not specify the quantum of spectrum that the operators could bid for.

The draft policy also calls for strict measures via roll-out obligations to ensure that operators do not hoard 3G spectrum. It says operators would be given a year to fulfil such obligations, failing which they would be fined a spectrum cess of 2.5% on their bid price per quarter during the second year. If operators still don't comply with the roll-out obligations, their spectrum allotted to them would be cancelled and given to a new operator through a fresh auction. The draft policy adds that the defaulting operators would not be permitted to participate in the subsequent 3G auctions in future.

Last year, ET had first reported that a high-powered DoT committee, which was looking into TRAI's recommendations, had proposed that GSM players be permitted to bid for two blocks of 5 MHz equivalent to 10 MHz of spectrum. ET has also reported that new players would be allowed to bid, while adding that there would be reservations for state-owned telecom PSUs. CDMA players who want 3G spectrum in the 800 MHz band have to pay 25% of the highest bid for 2.1 GHz carrier meant for GSM players. This is because CDMA players will get only 2x1.25 MHz in the 800 MHz band, while GSM players get 2x5 MHz in the 2.1 GHz band.