Analysis: Indian 3G spectrum auction

INDIA & THE UK: According to a recent local news, the Indian guidelines for 3G and WiMAX spectrum allocation are now being deliberated by the Telecom Commission, the apex body of the Department of Telecommunication (DoT), and the question of whether foreign telcos will be permitted to participate in India’s 3G auction is almost settled.

The final decision is expected to be unveiled some time this week.

This means that the long-lasting feud between the Telecom Regulatory Authority of India (TRAI) and DoT over India’s 3G spectrum policy is coming to an end. The key arguments have been around base pricing and participators in the 3G spectrum auction.

The regulator would prefer the auction to be restricted to existing operators because they already have the infrastructure in place and the services can become operational quickly. However, the government is willing to include keen foreign players in order to push up revenues as well as possibly bring convergence and innovation.

With the government having the authority to overrule the regulator’s recommendations, we believe it is likely that non-licensed foreign players will be included in the bid process.

In the meantime, some other agreements have finally been reached. The TRAI gave its nod to hiking the reserve price for the pan-Indian 3G spectrum auction to Rs 22.6 billion (€332 million), which is double that prescribed by the TRAI in 2006.

However, we do not believe this will have a significantly impact on the auction amount, which will be much higher than the base price due to the high number of bidders.

Obviously, the Indian 3G policy has been attracting the eyes of all the global operators as it is becoming a hot market in the world. So far, it is one of biggest emerging mobile markets and also has one of the highest growing mobile subscriber bases.

According to the TRAI’s statistics, wireless subscribers reached 261 million as of 1Q08, an increase of 100 million subscribers from the year before. With the penetration rate at only around 20 percent by the end of 2007, there still is substantial room for India’s mobile subscriber base to grow.

India is far more open to foreign investors than other countries in the region. Its FDI limit for telecoms is up to 74 percent, which is easily one of the highest in Asia.

The most famous global majors, like AT&T, DT and NTT DoCoMo, might find it a welcome relief to enter into the India market via the 3G route. In contrast, the existing telcos could have opposite feeling: the high price for 3G spectrum and forthcoming intensified competition will bring increased pressure.

The author is Research Analyst with Ovum