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Only three 3G licenses in India, as Huawei expands there

By CAROLINE GABRIEL

Published: 12 January, 2010

READ MORE: Spectrum | India | Huawei Technologies | Regulator | UMTS

The rules are changing once more in the Indian 3G auction, now expected to start next month. As the Department of Telecom continues to argue with the defense agencies about vacating the spectrum, it seems India will only be able to award three licenses per circle (telecoms operating region) rather than the hoped-for four. This could be a major setback, given the high levels of interest in the licenses and the desperate need for more wireless capacity to be built out in urban India.

"In the case of the 3G auction, the government has decided to assign up to three blocks of 5 x 2MHz of paired spectrum in the 2.1GHz band in each of the 22 circles," said the official document inviting bid applications. This is in addition to the 5MHz already guaranteed to the state-owned carriers - MTNL in Delhi and Mumbai and BSNL everywhere else.

According to local newspaper The Economic Times, the reduction in the number of licenses is down to delays in clearing spectrum held by the Ministry of Defense. A partial auction was deemed preferable to further delays, and the remaining licenses could be auctioned at a later date. The sale process should now start on February 12, with commercial 3G launches required to begin by the start of September. The WiMAX auction will begin two weeks after the 3G sale is completed.

Also in India, Huawei is to invest $500m in R&D and manufacturing for this huge market, with particular focus on the coming 3G and WiMAX waves. The Chinese vendor has suffered in India lately, with a huge GSM win at BSNL put on hold amid various government probes. It will now invest the sum over five years, mainly in a research and manufacturing center in Bangalore, said Max Yang, CEO of Huawei India. The company plans to increase staff numbers in India by 50% to 6,000, mainly at the Bangalore center, which is already its largest non-Chinese research facility.

Yang told the London Financial Times that Huawei wanted to be seen as a "local operation" and to "dispel the mystique" - a nice word for Indian suspicions of the firm's links to the Chinese government. This has led to the vendor reportedly being barred from selling equipment for deployment in capital New Delhi, or in sensitive political zones near national borders. Also, Huawei was one of five Chinese vendors penalized last month for dumping SDH equipment with tariffs of up to 236%. An expanded local manufacturing base could help avoid such problems in future.