Business - Global Telecom majors to stay away from 3G bid

NEW DELHI: A closer study of the government's recently announced 3G auction guidelines has managed to cool the ardour of several global telecom operators and potential new entrants , many of whom are now planning to stay away from the bidding ring.

Companies have downgraded their interest to "negative" as the implications of steep financial and regulatory barriers, coupled with pockets of uncertainty for new entrants, sink in.

Till recently, companies like NTT, AT&T, Deutsche Telecom and Etisalat had shown interest in India's mobile market. The absence of global telcos in the bidding ring threatens to affect government's ambitious plans of netting up to Rs 40,000 crore from the auction of third generation (3G) spectrum. If existing operators dominate the bidding, the auctions will fetch a fraction of telecom minister A Raja's ambitious target.

Speaking to ToI on condition of anonymity, potential new entrants listed four key reasons for their negative response to 3G. The first is what they describe as an "unjustifiable, discriminatory and burdensome payment" of Rs 1,651 crore to first obtain a unified access service license. Unlike for existing operators, for 3G entrants, this is the price of a paper without the 4.4. to 6.2 MHz of startup 2G spectrum.

"If the objective of the 3G policy was to raise revenues through new competition, then it has failed, as new entrants face a serious disadvantage against existing operators," said Arpita Agarwal, associate director-telecom, PwC.

"The second deterrent is the mindless application of April's M&A guidelines to 3G licences ," a potential bidder said. A 2G operator, under the present M&A norms, is not only allowed, but uniquely qualified to bid for and acquire 3G spectrum . In contrast, a 3G winner cannot merge with or acquire any 2G operator (existing or new) for three years.

The third concern arises on account of uncertainty of 3G spectrum allocation beyond 5 MHz. A 3G bidder can neither bid beyond a single block of 5 MHz nor acquire 2G spectrum. "Our growth is handcuffed from the start," said another potential bidder.

Agrees Kunal Bajaj, director-India, BDA, a global consulting firm. "A standalone 3G business will not work. Clearly, global firms will be constrained to find a business case given the severe policy limitations," he said.
According to operators, multi-billion dollar bids without line of sight on future 2G or 3G spectrum is a gamble too dangerous for them to take.

Potential bidders also grieve over the lack of clarity on several areas critical to bid planning, such as number of blocks per circle, timing of auctions, interim steps and rules regarding transfer and sharing of spectrum.