India delays spectrum auction, says it will revisit M&A rules

With yet another delay confirmed by the government, it’s anyone’s guess when India will begin to hold its much-maligned auction for third-generation licenses.
The 3G auction for carriers that want to deploy UMTS-based service was set to start Dec. 7, and the auction for CDMA and WiMAX licenses would begin two days after the conclusion of the first auction. However, foreign telecom operators interested in bidding for the 3G licenses have asked for more time due to the auction being conducted over the Christmas holidays. Now the government is saying it hopes to complete the auction by March, the end of India’s financial year. The government has been trying to conduct an auction for 3G services since 2007, but the process has been delayed numerous times as various agencies had conflicting agendas regarding the spectrum, minimum bid prices and a change in political power.
Details of how much spectrum the government is releasing are still sketchy, but minimum bid prices have been set at $714 million for a countrywide UMTS license. Four slots would be issued across the 22 regions, or circles, of the country. The two-government controlled operators, BSNL Ltd., and MTNL Ltd., already offer 3G services, but will have to pay the same amount as the winning 3G bidder following the auction. The minimum bid for WiMAX licenses is about $357 million.
”3G spectrum auction is unlikely to attract additional new players or entice most of the new 2G licensees to participate,” said Ovum’s Amit Gupta, principal analyst, based in India. However, the government’s decision on the number of available 3G blocks to be auctioned will have some ramifications on the competitive landscape, he said. “If all the blocks are auctioned, then the smallest two of the six probable bidders – namely Idea and Aircel – might increase their chances and affordability of acquiring spectrum.”
In an interview this week with RCR Wireless News, Gupta said he wouldn’t dare hazard a guess at when the auctions would start now. Indian operators want to be able to deploy 3G services to offer new premium data applications on their network to grow revenues, and also because they are facing capacity constraints. It now appears the winning 3G bidders will also get access to 2G spectrum as part of the government’s rules. Existing operators may bid as part of a defensive strategy. “I hope that too much competition doesn’t jack up the price,” he commented.
WiMAX licenses
WiMAX licenses will be sold in 20-megahertz blocks of spectrum across the 22 regions, said Tim Hewitt, chairman of the regulatory working group at the WiMAX Forum. “We’ve had a strong team working with the government for two years on this,” he noted. Bringing wireless broadband access to the country is a government-stated initiative because broadband penetration today is close to zero, and a big opportunity for WiMAX operators.
CDMA licenses
The auction is important to the country’s two CDMA operators, Tata Teleservices and Reliance Communications, because it marks the first time they can bid for more CDMA spectrum, said James Person, COO with the CDMA Development Group. In the past, operators could only access more spectrum once they proved they were at capacity, which was a disadvantage to CDMA operators because CDMA technology is more spectrally efficient than the GSM protocol. With 1.3 billion people in India, to date 90% of the country’s wireless subscribers are primarily using prepaid voice services, Person said. The potential to upsell these customers to mobile Internet services is huge, Person said, echoing Hewitt’s comments.
In related news, India’s telecom regulator said it plans to revisit merger-and-acquisition rules that may make it easier for wireless operators there to consolidate. Presently about eight or nine operators compete in the various regions. Operators don’t have as much incentive to consolidate because they cannot trade spectrum as part of the deal, according to published reports.