Indian operators prepare to bid as spectrum levy looms

Now that the deadline for submissions has passed, operators have confirmed their involvement – or otherwise – in India’s 2G spectrum auctions.

Telenor has confirmed that it will participate despite speculation that it would withdraw following its dispute with Unitech over their joint venture Uninor, which had its licences revoked. The case has now been resolved.

In addition, major players Bharti Airtel, Idea Cellular, Tata Teleservices and Vodafone have confirmed that they plan to bid. However, several big-name operators have not provided submissions, including Reliance Communications and SSTL (Sistema Shyam Teleservices).

The auctions are due to begin on 12 November, with the government aiming to fetch around INR400 billion (US$7.5 billion) for the 1800MHz spectrum. For 5MHz of spectrum covering all of India’s 22 telecom circles, the starting bid is INR140 billion (US$2.6 billion).

Many major operators lost their 2G licences after the 2008 process in which they were awarded was dismissed by India’s Supreme Court as “totally arbitrary and unconstitutional.”

Reliance, Sistema and Telenor all had their licences cancelled as a result, with Sistema maintaining that it “has been unfairly penalised”. As a result of this and “the level of recommended spectrum prices which makes the business case unviable”, the operator has stated that it “had no choice other than not to take part.”

Several of the larger participating operators did not previously hold 2G licences, but intend to purchase spectrum to make use of its additional capacity for their networks. However, a new government proposal could discourage larger acquisitions.

Operators could face a levy on “excess spectrum” in certain telecom circles, with the fee likely to apply to spectrum blocks of over 6.2MHz. A one-off charge on all such blocks could provide the government with as much as INR226 billion (US$4.24 billion). The charge would be calculated based on the price of spectrum in 2001, rather than the current rates which are over seven times higher.

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