India presses ahead with 3G auction but cuts licenses

 The Department of Telecom (DoT) will press ahead with its 3G plans but has cut back on the number of 3G licenses because of a lack of spectrum.

In an information memorandum, the DoT has announced the country’s long-awaited 3G auction would start on January 14, 2010.
It was originally set for December 7 but was delayed because the defense ministry had not yet vacated key 3G frequencies.
Communications Minister A. Raja last week warned that the auction could well be delayed well into next year if the spectrum dispute were not settled.
But sources have told that pressure from the key committee of ministers, which is keen to seen the auction proceeds land government coffers this financial year, has forced Raja’s hand.
The department has set a reserve price for a pan-India 3G license of 35 billion rupees ($751.2 million). But because of the lack of spectrum, it will be some time before national 3G coverage is feasible.
Under the DoT’s original plan, five licenses were to be sold off in each of the 22 telecom circles, with one reserved in each circle for either of the state-owned operators BSNL or MTNL. Now the full five licenses are available in just 15 circles.
Only limited spectrum is available in areas of national security sensitivity, in particular close to the Chinese, Pakistan, Jammu & Kashmir borders.
Just two licenses (plus the reserved BSNL/MTNL license) are available in Delhi, Gujarat and Uttar Pradesh. No 3G spectrum at all is available in Rajasthan on the north-west border, and only the single state license will be auction in the far northeast corner.
The DoT said that it will sell off the frequencies in blocks of 2 x 5MHz.
The base price for individual circles has been set at 3.2 billion rupees for the eight metro and category A circles, 1.2 billion rupees for the eight category B circles, and 300 million rupees for the category C circles.
Foreign firms will be entitled to bid for 3G licenses through an Indian subsidiary, but only if that subsidiary is at least 26% domestically owned. Such companies will also need to acquire a telecom license, and receive the approval of the Foreign Investment Promotion Board (FIPB).
The department said the Wimax auction will take place two days after the close of 3G bidding.