Indian DoT Issues Formal Notice of Interest for 3G Bids, Spectrum Available in September 2010 

India's DoT has finally released a notice inviting applications for the much-delayed 2.1-GHz 3G auction—and the 2.3-Ghz Broadband Wireless Access spectrum auction which is now scheduled for two days after the 3G auction. For the 3G auction, there will be three private players allowed in 17 circles, including Delhi, Mumbai, Kolkata, and four private carriers licensed in the remaining five circles including Punjab, West Bengal, and Bihar. The 2.1-GHz 3G spectrum available will be in paired blocks of 5 MHz, while the 2.3-GHz spectrum will come in two unpaired blocks of 20 MHz. No bidder can acquire more than one block of BWA and one block of 3G spectrum. MTNL has already been allocated one block of 2.1-GHz spectrum and one block of 2.3-GHz spectrum in Delhi and Mumbai, while BSNL has received the same in the other 20 service areas. This is outside of the other bands up for sale but they will see their spectrum allocation shifted to a new harmonised frequency in some areas. They will also be required to pay the winning price as set by the auction process. Authorisation for point-to-point backhaul spectrum is a separate matter.

Bidder Qualifications

Bidders will also need to hold a relevant service license, for example a Unified Access Services ("UAS")/ Cellular Mobile Telephone Service ("CMTS") licence to offer 3G services, or prove previous experience of operating 3G services, or undertake to obtain a UAS license as a prospective new entrant. For the BWA license an ISP category A or B license will also suffice. Successful bidders as new entrants can assign spectrum licenses to companies with service licenses in which they hold at least a 26% stake. Foreign entities can participate and gain spectrum licenses directly but are limited to a 74% foreign shareholding in any telecoms service licensee. No two applicants should have common ownership from an entity holding more than a 10% equity stake in them both—apart from the Indian government.

Auction Schedule

The last date for submission of applications to become a bidder is timetabled for 19 March 2010, ownership details will be published on 23 March and compliance certificates issued on 26 March for pre-qualification on 30 March. A mock auction testing the system will be held on 5–6 April and the 3G auction will start on 9 April 2010. The BWA auction will then be held two days after the close of the 3G auction. Payment will be due within 10 calendar days of the auction close. Licenses will be valid for 20 years unless revoked or surrendered.

Auction Process

The auctions will use a simultaneous ascending e-auction system conducted over the Internet. There will be two stages to the auction with the first, a multi round "clock" stage allocating a single block of spectrum in each service area to winning bidders. The clock stage sets a "Common winning price" for all blocks within the service area. A second frequency identification stage will identify the specific frequencies for winning bidders. These will be assigned by a "…random identification of frequencies performed automatically by the Electronic Auction System" though the right is reserved for the government to change frequency allocation at any point in the license duration for band harmonisation or spectral efficiency.

Deployment Obligations

In metro service areas, 90% coverage will be required within five years of the effective granting/spectrum availability date. In category A, B, and C service areas at least 50% of the District Headquarters ("DHQ") (or in lieu of this, any other town in the district) in the service area will be covered using the 3G Spectrum, out of which at least 15% of the DHQs should be rural Short Distance Charging Areas ("SDCAs"), within five years. Failure to do so in year one will require a payment of 2.5% of the bid amount per quarter and the license could then be withdrawn after one year.

Spectrum Use Charges

The reserve price has been set at 35 billion rupees (US$756.8 million) for the whole of the 3G spectrum and 1.75 billion rupees for the BWA spectrum. In addition to the auction price and license fees, operators are liable for a spectrum use charge of 3–8% of Adjusted Gross Revenue (from 32G and 3G services) depending on the size of 2G and 3G spectrum held (from 4.4 MHz to 15.2 MHz) and the technology used (GSM or CDMA). BWA spectrum licensees will pay 1% of Adjusted Gross Revenues from BWA services.

Outlook and Implications