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The Minister for IT and Communications, Mr A. Raja

New Delhi, Nov. 25 The Department of Telecom has changed its earlier decision to conduct simultaneous auction for third generation mobile and wireless broadband access spectrum.

According to the draft information memorandum for the auction, expected to be released shortly, spectrum will now be auctioned in two phases. While the bidding for broadband spectrum based on technologies such as WiMAX will be held on January 16, 2009, the radio waves for 3G mobile services are likely to be put on the block in the second phase starting February 9, 2009.

The DoT has also decided to impose a revenue share of only 1 per cent on operators winning WiMAX spectrum. In comparison, operators winning 3G spectrum will have to pay 2 per cent additional revenue share if they have more than 8 Mhz of 2G spectrum and 1 per cent if they have less. In addition, WiMAX players have been allowed to pay spectrum charges after one year of getting the radio waves while 3G operators will have to start paying retrospectively starting January 2009.

Since the DoT has already allowed WiMAX to be used for both data and voice services, there is a possibility that some domestic companies could choose to not bid for 3G given its higher base price. While 3G bidders will have to pay at least Rs 2,020 crore for pan-India spectrum, operators who win WiMAX spectrum will have to pay only Rs 1,010 crore.

Operators including Reliance Communications, Tata Teleservices and Aircel are looking at deploying WiMAX technology in a big way. With the auction being done sequentially, some of the operators may now have the option to skip the 3G auction altogether and participate in WiMAX auction only. Simultaneous auction, on the other hand, would have raised the uncertainty levels, which in turn would have made the auction for both equally aggressive. However, government officials said that they would get better valuation for WiMax spectrum by auctioning it first.

To prevent anti-competitive activity, the DoT has barred bidders from entering into any arrangements with suppliers of equipment or software that would restrict the company’s ability to supply similar equipment to other operators. This assumes significance in the light of a number of global vendors and software companies planning to invest in operators using the WiMAX technology.

The DoT has also stipulated that no two bidders should have the same promoter owning more than 10 per cent stake. If two bidders have common ownership greater than 10 per cent, then one of them must withdraw by the last date of submitting the application or both will be disqualified.

The Government is expecting to earn Rs 30,000 crore from the auction process, which will be conducted online. The DoT is planning to auction 5 blocks of spectrum for 3G and 4 blocks for WiMax-based broadband services in each circle.

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