3G saga: End in sight but vision remains fuzzy

MELBOURNE, AUSTRALIA: According to a new report from Ovum, the global analyst and consulting company, 3G spectrum auction in India can be expected soon.

However, there is still uncertainty about the number of blocks to be released. Although this decision will have little impact on technology evolution, it will have important implications on the ability of the smallest two of existing six private big players to participate and win spectrum.

Amit Gupta, principal analyst, based in India, Ovum, said: ”3G spectrum auction is unlikely to attract additional new players or entice most of the new 2G licensees to participate. However, the government’s decision on the number of available 3G blocks to be auctioned will have some ramifications on the competitive landscape. 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."

Incumbents in the Indian wireless industry are in immediate need of 3G spectrum to add capacity to their strained networks and to offset decline in average revenue per user (ARPU) by launching high-end value-added data services. Despite industry needs, ambiguous policies, scarcity of spectrum in the possible 3G bands and difficult political environment have delayed the auction by many years.

Most of the contentious issues blocking the auction have been resolved. Therefore, we are cautiously optimistic about the release of spectrum in coming months. However, the government still have to make a decision on key issues such as the amount of spectrum to be released and the number of players allowed to participate in bidding.

We do not believe that 3G spectrum will attract more new players in the industry. The decision on the amount to be released is likely to have little impact on bidding strategy of the four largest players and participation from new 2G licensees. However, if the auction is limited to only three blocks of 2x5MHz spectrum, Idea and Aircel, who are among probable bidders, will find it difficult to outbid their bigger rivals.

Although DoT anticipates a considerable impact of the amount of spectrum to be released on technology evolution, we believe that 3G evolution for both GSM and CDMA operators is clear. For 4G, considering global trends, both types of operators are likely to adopt LTE and expected changes in the industry in next few years will facilitate that.

Amit Gupta says, “Although 3G spectrum in India is much needed and should be auctioned soon, its impact on competition and technology evolution is overstated.”