3G spectrum auction deferred to Jan 14

The Department of Telecommunications has announced revised guidelines for auctioning third generation (3G) spectrum with a new deadline of January 14, 2010, even as a CBI probe into the alleged irregularities in the allocation of 2G spectrum gathers steam. The earlier deadline for auctioning the spectrum was December 7, 2009. The reserve price for a pan-India 3G spectrum has been set at Rs 3,500 crore, revised upwards from Rs 2,020 crore, while the minimum bid amount for WiMAX is fixed at Rs 1,750 crore. The telecom department has also permitted foreign operators to participate in the bidding process on their own, but they would be required to acquire a telecom licence before rolling out services. While DoT had set a base price of Rs 2,020 crore for a pan-India 3G spectrum, the finance ministry had demanded that the base price for 3G be doubled to Rs 4,020 crore and that for WiMax to Rs 2,020 crore. Later, the matter was referred to a group of ministers, which concluded the base price as Rs 3,500 crore for pan-India 3G spectrum. Accordingly, the base price for Delhi, Mumbai and category A circles will be Rs 320 crore, for Kolkata and category B circles, it will be Rs 160 crore and for C circle will be Rs 80 crore. The new entrants in the telecom space who will be standalone 3G service providers will have to share 3% of their annual revenues with the government as spectrum usage fee while existing operators will have to pay an additional 1% of their revenue. Existing players Bharti Airtel, Vodafone Essar and Idea Cellular currently pay up to 6% of revenues to the government as spectrum usage charges. The spectrum charge would be payable on total revenue of 2G and 3G services taken together. DoT has allowed exemption on payment of spectrum usage fee for one year for the standalone 3G service providers. The government has said that a total of 4 blocks of 20 MHz would be auctioned in each circle. However, with shortage of spectrum in the Delhi and Gujarat circle, only three slots would be auctioned, while one out of three has already been reserved for state-owned telcos, BSNL and MTNL. Although the DoT has said that foreign operators would be permitted to participate in the 3G auction process on their own, the existing policy requires them to either apply for a fresh telecom licence here or transfer it to a company incorporated in India. Applying for a fresh UASL licence would cost the entity an additional Rs 1,651 crore. DoT hasn’t clarified if participants including the foreign operators who win 3G bids would be eligible for 2G spectrum. Currently all telecom services in the country are offered on the 2G platform. The document also says that DoT after consulting the finance ministry may extend tax sops to successful 3G bidders.
4 blocks to be auctioned in each circle, wherever available.
Only 3 slots in Delhi & Mumbai
Reserve price for pan-India 3G spectrum fixed at Rs 3,500 crore, up from Rs 2,020 crore set earlier
Foreign operators allowed to bid, but would have to acquire telecom licence before starting operations
Standalone 3G providers to pay 3% of revenues as spectrum usage fee, after 1 year of operation Existing operators to pay additional 1% of revenue as spectrum usage fee.
Players already paying up to 6% of revenues towards the fee for 2G spectrum
Permission sought for ECBs:This implies that the amount each telco pays towards 3G bids would be treated as expenditure over the period of licence and would not be taxed. Permission has also been sought to allow telcos and internet service providers to raise funds for auctions through the external commercial borrowings (ECB) route. Earlier this year, the Reserve Bank of India (RBI) had allowed telcos to raise up to $500 million through ECBs for 3G auctions.

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