Claims That India May Delay 3G License Auction

There have been unconfirmed reports that India's 3G license auction could be delayed until next year after the government found that it had not cleared the necessary radio spectrum in nine of the country's 22 circles.

The government could however still hold the auction and simply amend the license details to delay spectrum allocation until it is available. The government has previously awarded licenses several months before the radio spectrum was available, so the move would not be unprecedented.

State owned operators, MTNL and BSNL were both granted 3G licenses in advance of the main auction to private operators - and will be required to pay the same license fee as is finally agreed on when the private auction is completed. Both expect to launch their initial 3G networks in Dec/Jan.

There have been some comments that as the various departments and regulator have not agreed on the spectrum fees and concern about the economic climate - the issue could be used as a delaying tactic until the financial markets are more robust.

Communications and IT minister, A Raja recently said that the Department of Telecoms (DoT) is planning to double the annual licence and spectrum fee for the service providers. The current license fee varies between 1-5 percent per circle along with a radio spectrum fee of between 2-4 percent per circle. The 3G networks had been expected to pay a much lower spectrum levy - estimated at just one percent of revenues.

As the government is planning to hike its revenue share from the operators, they in turn are trying to push for data services to be excluded from the calculation on the grounds that it should only apply to voice calls. If the operators are successful, it could have a significant impact on the government revenue, particularly for the 3G networks which are expected to be more data-centric as data services are not charged a levy, compared to the 3-9 percent charged for voice services.

Reliance Communications is understood to be excluding internet services from its levy paid to the government, and the Cellular Operators Association of India (COAI) has written to the telecom secretary to demand the same treatment for the GSM network operators.

Posted to the site on 20th October 2008