>TELECOM SECTOR (FIRST GLOBAL)

The Story.... The auction of 3G & Broadband Wireless Access (BWA) services in India is finally expected to see the light of the day, following the resolution of issues between the Department of Telecom (DoT) and Ministry of Defence (MoD). MoD has agreed to release 25 Mhz of 3G spectrum for provisioning of 3G services in exchange of deployment of an exclusive optical fibre communications network for defence forces by ministry of telecom. The defence spectrum will be available for commercial usage by June 2010, after which the telecom circles will have spectrum ranging between 25 MHz and 60 MHz. The availability of four 3G slots for auction in all circles, especially in the high ARPU generating circles of Delhi and Gujarat, will result in rational bidding for these circles, as well as provide end users more options to choose from. It will also encourage more players, including global telecom service providers to participate in the bidding. The bidding multiple is expected to be much higher in the more lucrative sectors of the metro and ‘A’ regions than for the ‘B’ and ‘C’ circles, as the former have greater potential for the growth of data services. DoT is also expected to resolve issues related to additional 2G spectrum allocation before 3G spectrum auctions, in order to give service providers greater clarity before planning their bids for 3G spectrum. The impact on the financials of the service providers can be quantified when the bidding prices are ascertained. Service providers can now look forward to 3G auctions as an opportunity to support their declining ARPUs, as well as improve the quality of their voice services by using 3G spectrum to compensate for the scarcity of 2G spectrum.

Department of Telecom (DoT) & Ministry of Defence (MoD) finally resolve issues related to vacating of 3G spectrum to clear the road for auction of 3G & Broadband Wireless Access (BWA)
services in India…

Availability of four slots in all circles to result in more rational bidding & provide end users more options to choose from…

Action plan & policy for 3G/BWA spectrum auction: The agreement between DoT and MoD over the vacating of 3G spectrum by the latter has ensured that the auctions will be held as per schedule. The DoT now has clarity over the frequency bands that will be available for auction and the details of the same will be provided to service providers on December 8, 2009. Without the release of 3G spectrum by the MoD, there would have been less than four slots available in a few circles. The agreement between the DoT and MoD will now do away with the scarcity premium in these circles, which would have been detrimental to the interests of end users in these regions. A few issues of concern that still remain are policies relating to 2G spectrum allocation to successful 3G bidders as they will get Unified Access Service (UAS) license to provide both 3G and 2G services in India. No consensus has also been achieved on additional 2G spectrum allocation policy. The decision on both these policies will impact the bidding for 3G spectrum and clarity by DoT on these issues will aid service providers to plan their strategy for 3G auctions. The key features regarding the 3G & BWA spectrum auction are as follows:


• Four blocks of 3G spectrum (excluding one block for BSNL/MTNL in each circle) will be available for auction across all the 22 circles. In case of BWA auctions, two blocks per circle will be available for auction in the 2.3 GHz band.

• The base price reserved for the pan India 3G spectrum is Rs.35 bn and Rs.17.5 bn for the pan
India BWA spectrum.

• Auction for 3G services will be held from January 14, 2010, which will be followed by the auction for BWA services.

• The telecom department will be responsible for obtaining clearance for the optic fibre network, an Rs.100 bn project, from the Cabinet Committee of Economic Affairs (CCEA) by December 3, 2009 and will complete the setting up of the fibre network by December 2012.

• The MoD will sign an agreement for releasing 25 MHz of 3G spectrum on December 7, 2009, which will become available for commercial usage only by June 2010, due to the time required by the ministry to shift the operations of its equipment from these (spectrum) bands.

• After the defence spectrum is made available, the telecom circles will have spectrum ranging
between 25 MHz and 60 MHz.

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