Indian 3G auction pushed back to February

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Mobile Industry & Technology Journalist - freelance

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Indian 3G auction pushed back to February

By CAROLINE GABRIEL

Published: 6 January, 2010

Yet another 'final date' has been set for the Indian 3G and WiMAX auctions, which will now start in February, probably around the 10th. The much postponed process had been scheduled to begin on January 14, but deadlines started to slip before the holiday, mainly because of issues with the defense department, which needs to vacate some of the spectrum on offer.

The auctions are expected to yield INR250bn for the Indian federal government, which will help it address a fiscal deficit that could reach 6.8% of gross domestic product in the year to March 31.

Also running into hot water in India is state telco BSNL's huge GSM expansion contract, totalling 93m lines and a likely $10bn. This has also met a series of obstacles, including withdrawal of Nokia Siemens from one bid (which it claimed would be lossmaking) and reported government resistance to the use of Huawei kit in sensitive regions, because of alleged links to the Chinese authorities. Now BSNL has suspended its tender again amid a new probe by India's anti-corruption agency, the Central Vigilance Commission.

Prime minister Manmohan Singh has intervened personally in the saga, which is delaying much-needed capacity enhancement for BSNL as it battles against rapidly expanding privately held rivals like Bharti. The hold-ups are also delaying revenue for the winners of the first phase tender, Ericsson and Huawei, which have been unable to complete any formal deal because of investigations by various Indian authorities.

On hearing of the CVC probe, BSNL put the tender process on hold until all investigations have been concluded, said local newspaper The Economic Times. "We are not cancelling the tender or halving it as suggested by one of the government representatives on our board," the newspaper quoted an unnamed 'top executive'.

The CVC is examining possible post-tender negotiations between BSNL and Ericsson, geared to lowering the agreed price. CVC guidelines do not permit such post-tender talks, though BSNL did concede in the newspaper interview: "We were seeking a discount from Ericsson and have been in talks with them on this for over a month. A 20% reduction in the tender price can save the company up to $1bn. In the past too, post-tender negotiations were part of all deals we had signed and this has helped us bring down costs significantly."

In a third setback for Indian mobile communications, the deadline for mobile number portability has also been delayed. The service was due to launch on January 1 in the main metro markets but operators claimed they had not yet made the necessary network upgrades. The launch is now expected to take place by the end of March.