Vodafone Seeks Delay in India's 3G License Auction

Even mighty Vodafone seems to be feeling the credit crunch, and has written to the Indian government seeking a delay to the 3G license auction - citing difficulties in raising the necessary funds. The auction is expected to be held before the end of this year, although recent reports have suggested the government may have to delay the auction due to radio spectrum issues.

"Mobilising financial commitments in the current environment is proving to be an extended process," Vodafone GroupĂ's director (public policy), emerging markets, Neil Gough said in a communication to the department of telecom (DoT).

Local business newspaper, the Economic Times says that it has learnt that at least three other companies have written to the government seeking a delay.

While five 3G licenses are available in the first round, two have already been reserved for the state-controlled telcos - leaving just three nationwide licenses for grabs. As further licenses are unlikely to be made available for at least another year, competition for the available licenses is expected to be intense. The arrival of deep pocketed Russian and Gulf backed firms into the Indian market has heightened the issue as they may be able to afford a "land-grab" and secure the licenses at (almost) any cost to lock out the incumbent operators while they build up their own networks.

There are also ongoing concerns regarding some uncertainly about the revenue share which will have to be paid by the license holders once they are allocated their radio spectrum.

The Indian government could delay the auction for a few months, publicly so that the commercial firms can secure the funding necessary - while giving it time to sort out the remaining regulatory headaches. However, the government would not want to delay the auction too long, as the country faces a General Election in May 2009. A successful (and lucrative) 3G license auction would be beneficial to the incumbent government during its election campaign.

On the web: Economic Times

Posted to the site on 27th October 2008