• MOST READ

• LATEST NEWS

The Indian 3G auction saga gets more twisted by the day, and now further delays seem inevitable, while the government has also announced a surprise U-turn, deciding to offer only three licenses per region to private operators.

This reduction of private licenses from four to three (state-owned BSNL and MTNL are guaranteed a slot, the latter in Delhi and Mumbai and the former in the rest of the country) could cost the Indian treasury INR5,000 crore in revenue, and does not indicate that the bidders will be able to acquire larger swathes of spectrum, as many believe they need to create viable business models. Instead, the change of heart has been forced by the failure of the Ministry of Defense to vacate a second tranche of its airwaves any time soon. Agreement may be reached and a fourth license offered at a future date.

The dispute with the MoD appears to have pushed the 3G auction out yet again, perhaps as late as March 2010 rather than January as planned. It is not yet clear whether India will concede to calls from the broadband community to decouple the WiMAX spectrum sale, which is due to follow immediately after the 3G process is complete, so that this can go ahead as planned.

The notice inviting 3G bids was scheduled to be issued on December 8, but may be delayed until the end of the month because of the MoD negotiations, which would make it impossible to hit the deadline of January 14 to start the sale process. In October, the armed forces vacated 10MHz, or two slots of 3G spectrum, to be used for commercial telephony, and the MoD had said it would move out of a second tranche around June 2010.

Meanwhile, Indian 2G operators remain desperately short of spectrum to keep up with mushrooming demand for mobile services, and are engaged in a painful price war. This is almost certain to lead to a wave of consolidation and this may already have started, with new entrants Etisalat and Allianz Infratech reportedly planning to merge. According to the Times of India, Etisalat - previously known as Swan Telecom - is to merge its activities in 13 circles with Allianz Infratech's two universal access service (UAS) licenses. This will give the combined entity presence in 15 of India's 22 telecoms regions or circles.

Neither operator has launched networks yet, and they are able to bypass current M&A restrictions because there is no overlap in their territories, which means the merger could complete as early as the first quarter of next year. Etisalat of the United Arab Emirates bought a 45% stake in Swan Telecom in September 2008, valuing the company at $2bn. Allianz Infratech was granted UAS licenses in Madhya Pradesh and Bihar in August 2008.

According to the reports, regulator TRAI is currently looking to change the M&A rules to encourage consolidation in the telecoms sector. This could reduce the number of cellcos from the current 13-14 per circle, to 8-9, in the next 18 months and perhaps down to six per circle over the next 2-3 years. The current guidelines do not allow for mergers of two entities in the same service area, or the spectrum of two entities in the same service area to be combined until three years from the effective date of license.

Related Stories

COMMENTS

No comments yet. Be the first to add a comment!

Digital Money: The Convergence of Contactless Card and Mobile Payments

This report examines the emergence of digital money from the perspective of the convergence of card-based proximity payments to the...

Cloudbooks: Market Analysis and Forecasts
This report is based on interviews with device OEMs, retailers and resellers and provides a comprehensive analysis of the new cloudbook...