India unsure of 3G auction by end-March

NEW DELHI, INDIA: India's government is not sure if it can conduct a 3G wireless spectrum auction by the end of March, officials said on Tuesday, increasing the risk of widening the country's fiscal deficit for the current financial year.

Both Cabinet Secretary K.M. Chandrasekhar and Finance Secretary Ashok Chawla said issues that had delayed the auction beyond Jan. 14 had been resolved but neither offered a new date.

"I can't say whether the actual auction will happen before 31 March," Chawla told Reuters.

The government had pegged the fiscal deficit at a 16-year-high of 6.8 percent of gross domestic product in the current fiscal year ending March 31, after factoring in the estimated $7.6 billion proceeds from the auction.

"There is every risk of overshooting (the target)." Abheek Barua, chief economist at HDFC Bank, said, but added there was no sign yet this would happen.

Officials have said revenue receipts may not be as bouyant as expected although Chawla has said the fiscal deficit for the current year would be cushioned by better-than-anticipated proceeds from stake sales in state firms.

India has completed a record 4.51 trillion rupees ($98 billion) gross borrowing program for 2009/10 and has not made any new proposal to tap the markets for the rest of the fiscal year.

The 3G auction had been delayed over differences between related ministries, including the Defence Ministry which holds much of the airwaves.

"I don't think it really particularly matters if (the auction happens) this year or next year," Chandrasekhar, the country's top bureaucrat, told reporters.

"I think they will take a decision based on how you (government) will maximize your (government's) revenue."

Top firms such as Bharti Airtel, Reliance Communications and Vodafone Essar are expected to bid.

Analysts say the older operators need the spectrum as their networks are congested and they need to meet cut-throat competition unleashed by new entrants like Norway's Telenor and Russia's Sistema.

India has been signing up 15 million mobile users each month, helped by call rates as cheap as 1 U.S. cent a minute, making it the world's fastest growing market for wireless services.

"For older players, it is like the devil and the deep sea," said Mahesh Uppal, director at telecoms consultancy Com First. "If you lower prices to add new customers, you risk messing up your network. If you reject them, you become uncompetitive."

"3G is an efficient spectrum. 3G will give them a way to reduce the pressure on their networks."

Analysts expect each phone company to spend up to $1.5 billion to get pan-India 3G spectrum, while building the high-speed wireless networks would cost billions of dollars more.