More Delays to India's 3G License Auction

There has been a further delay to India's already oft-delayed 3G license auction, after the Indian Cabinet decided to refer the issue to a Group of Ministers (GoM) to adjudicate on. The Department of Telecom (DoT) and the Finance Ministry have been battling over the reserve price which would apply to the auction.

The auction was expected to start on Jan 16th, when it was suddenly delayed until Jan 30th - and then delayed indefinetly.

The DoT had been preparing to auction the 3G licenses with a pan-India reserve price of Rs 2,020 crore (US$412 million), but the Finance Ministry wants to double that figure to a point which in a competitive auction could see the licenses sell for over US$1 billion each. However, the DoT is worried that such a move could reduce the number of companies willing to bid and hence a highly competitive auction with a low reserve price could drive prices higher than an auction with fewer interested players.

The DoT had proposed either increasing the reserve price to a mid point between the two figures - or a hybrid idea which would double the reserve prices in the highly prized urban areas, with a slight increase for the less developed regions and no change to the rural coverage licenses.

Foreign companies will be able to bid for a license on their own - but will then need to find a local partner willing (and able) to take a 26% stake in the company.

The current auction guidelines (pdf file 136 pages) can be downloaded from the Department of Telecoms website. Auctions for WiMAX licenses will commence two days after the 3G licenses are sold.

The two state owned operators, BSNL and MTNL have already been granted 3G licenses - and will have to match the final price paid by the winners in the commercial 3G auction.

Posted to the site on 28th January 2009