Indian 3G and WIMAX Auctions Get Green Signal for New Year

At last, the Indian government has given the green signal to the much delayed auction of 3G and WIMAX licenses, and the process should start this week and be completed by end of February.

The process will be overseen by NM Rothschild and Sons and is likely to spark a wave of capex investment across the subcontinent, and almost certainly create the largest WIMAX market in the world within two years.

The deadline for applications is December 31, and the WIMAX auction will begin on January 16 2009, and the 3G sale on February 9, a slight change from the previous plan to conduct both sales simultaneously. The Department of Telecom (DoT) is planning to auction five blocks of spectrum for 3G and four for WIMAX in each telecoms region or ‘circle’. At least two CDMA operators will be able to offer 3G services in each license area.

International players are likely to participate – in August, the DoT allowed foreign bids, provided the companies find a local partner (overseas companies can own a maximum 74% stake in an Indian operator). No operator can have more than one block per region.

The timing is not good in financial terms, since operators’ budgets are under intense pressure, and some had called for the auctions to be delayed until they had better access to funds; and so the government could well make far less from the sale than it would have done a year earlier, when the gains were forecast to be $10bn. But the authorities know that the wider social and economic effects of building out broadband wireless and 3G will outweigh short term financial shortfalls.

The auctions have already been delayed several times by regulatory and legal disputes, although some WIMAX progress has been made in 3.5GHz, and also because state-owned BSNL and MTNL have already been allocated 3G spectrum. These will have to pay the government amounts equal to the highest qualified bidder among the private players. Ahead of gaining licenses, some operators have already opened bidding for their network supply – Bharti Airtel is talking to Ericsson, Nokia Siemens and others.

The DoT has decided to impose a revenue share of just 1% on WIMAX operators, while 3G holders will have to pay 2% if they have more than 8MHz of spectrum and 1% if they hold less than that. The more flexible conditions for WIMAX reflect the government’s belief that it will be highly significant in boosting broadband penetration, but since WIMAX is allowed to be used for voice as well as data, there is an option for a larger player to decide to bid for this as an alternative to the more expensive 3G.