It's Final: 3G auction & floor price stay

NEW DELHI: The Department of Telecom (DoT) has endorsed telecom regulator Trai’s recommendations that India adopt an auction system with a reserve price of about Rs 1,400 crore per operator for pan-India 3G spectrum. Importantly, the government is also open to new telecom players from the global arena entering the 3G space in India.

“We have studied Trai’s recommendations. The 3G policy, which is slated to be announced shortly, will be in line with the recommendations of Trai. We are looking at competitive bids for 3G spectrum.

We also want foreign telecom operators to come in and offer 3G services — this will make it interesting for the subscribers and introduce competition in offering these services,” minister for communication and IT Dayanidhi Maran told ET today.

At present, spectrum for 2G services is offered for free to operators based on their subscriber base. “It is important to differentiate between the two — 3G is not an extension of 2G,” Mr Maran said. 2G refers to the services currently offered.

The government hopes to rake in a minimum of Rs 8,000 crore through the auction of 3G spectrum. Trai had recommended a reserve price of Rs 80 crore for category A (Mumbai and Delhi), Rs 40 crore for category B (Chennai and Kolkata) and Rs 15 crore for category C circles.

The DoT move implies that the government has rejected the demands of virtually the entire telecom industry to quash or reduce the 3G entry fee. All telecom companies (except the Tatas) had approached the Department of Telecom (DoT) seeking a reduction in the base price.

Besides, this also means that the DoT has failed to find merit in the operators’ stance that the auction methodology for spectrum allocation “combined with a high reserve price would affect their roll-out and expansion plans, and make the services unaffordable to the common man”. Additionally, if the government were to opt for open bidding system, then Indian operators will have to compete with global majors for 3G spectrum.

At present, operators are unable to roll-out 3G services as the frequency bands in which these services operate are occupied by the country’s defence forces. Mr Maran also said that the alternate communication project for the defence services would be completed by July 2007. “We remain confident of completing the project for the Air Force by July.

This will enable the defence services to release 42.5 MHz of spectrum for commercial 2G and 3G telecom use,” he said. “When we announce the 3G spectrum allocation policy, we will have spectrum available for these services. Operators therefore will not have to wait for 3G spectrum once the policy is announced,” Mr Maran added.

According to sources, the DoT while accepting Trai’s proposals for the auctioning of spectrum, was also working on the finer details such as the regulator’s suggestion that operators be granted a one-year moratorium on incremental annual fees for 3G spectrum from the time of assignment. Trai had said that after one year, the DoT should charge operators an additional annual spectrum charge of 1% of the operator’s aggregate gross revenue.