After a long wait, the Indian government has decided that it will auction 3G spectrum, and will allow foreign players to participate in the bidding. The spectrum is going to be released in the 2100 MHz band, which would make it compatible with rest of the world, barring a few countries such as the U.S.
Here are some specifics:
- Winners will be required to pay 0.5 percent of total adjusted gross revenue to the state on an annual basis for the first three years of operation, rising to 1 percent thereafter.
- Winners will not be allowed to trade or resell the spectrum and they will not be allowed to merge in the first five years after the grant.
- About 30MHz of spectrum will be sold in total.
- India will also auction licenses for broadband wireless (WiMAX) services, with the reserve price fixed at 25 percent of the amount for 3G spectrum.
The spectrum is going to be plentiful; our sources say that it will be enough to accommodate six carriers. The carriers we expect will make it to the finish line include the current leader, Bharti Airtel; Idea Telecom; Reliance and Vodafone (VOD). The two international cell phone companies likely to win the spectrum bid include AT&T (T) and Sistema.
If the rollout of voice services over past decade is any indication, this is a big opportunity for equipment makers. Ericsson (ERICY) and Nokia (NOK) have done well in India, and there is little reason why the situation would change, though one suspects the Chinese equipment vendors are going to act as deflationary counterweights to their Western counterparts.
The 3G services in India will eventually have to compete with WiMAX, which is being seen as the wireless broadband technology of choice by lawmakers. More importantly, this auction is a way for the Indian government to keep the telecom sector specifically and the economy overall growing at a healthy clip. India’s economy was catalyzed by telecom and call center businesses, then spread to other sectors.
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