All set for 3G a(u)ction

After all the brouhaha over second generation (2G) spectrum in the past few months, the Government has got it right by suggesting an open auction for 3G mobile licences in the country. This means that companies such as Shyam, Unitech, Videocon, STel and Swan, which recently got new 2G licences, will be able to take part in the auction for 3G services. A new company wanting to take part in the auction will have to take a unified access licence by paying an entry fee of Rs 1,650 crore for pan Indian operations. This could also give a chance to companies such as Moser Baer, Hindujas and AT&T which could not acquire a licence for 2G mobile services. Since these companies were at the back of a queue of applicants, they were left out by DoT based on the first-come first-served policy. Now they could straightaway bid for 3G spectrum after taking a licence. This will increase competition for existing operators such as Airtel, Vodafone and Reliance Communication as they were expecting the auction to be limited to only those companies which were currently in operation. Since new licence holders are still awaiting release of spectrum to launch 2G mobile services, they will compete hard with the existing players for acquiring 3G spectrum. While existing operators want 3G spectrum for packing in more subscribers in line with their growing user base, new operators would want it to kick start their operations. As per the proposals being finalised by DoT successful bidders would be given chunks of 5 MHz spectrum each in the 2.1 GHz band. A single operator will not be allowed to bid for more than 2 such blocks which means that a company like Airtel could get 10 MHz spectrum if it goes for an aggressive bidding. Given that DoT has 30 Mhz for 3G services, at least 4-6 operators could get a 3G berth. While BSNL and MTNL will get 3G licence without participating in the bidding, the two companies will have to cough up the same amount as quoted by the highest bidder during the auction process. The final guidelines are expected to be released by April and the auction is being planned for the later part of the year. Going by the initial enthusiasm from the operators Government can expect to rake in around $5 billion from the auction. Now that should prompt DoT to take a fresh view on allocating 2G spectrum also through an auction method instead of a flawed subscriber linked allocation criteria.

(Third generation services will enable mobile users to get high speed broadband connectivity on their handsets. This will allow operators to start offering interesting data services like video on demand and mobile TV. Operators also need 3G spectrum as it is more efficient in packing in more number of users in lesser bandwidth compared to existing mobile technologies.)