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New-age phone service next year

New Delhi, Sept 27: If all goes well, 3G telecom services will roll out in India by the second half of next year.

The government will finalise in the next three months its guidelines for the rollout of 3G services in India that will allow the country’s 200 million subscribers anticipated by the end of 2007 to use their mobiles to gain fast access to the Internet, trade in stocks, watch movies, download songs and even watch live cricket matches.

“The process for introducing 3G service has already been initiated in India and it is expected that we should be able to launch 3G services by the later half of 2007,” telecom minister Dayanidhi Maran told a conference here today.

What’s on offer

The guidelines will be framed after trawling the recommendations made by the Telecom Regulatory Authority of India (Trai) in a 149-page document that it released today on spectrum — or radio frequency — allocations to telecom operators, which has been the controversial issue that has set the airwaves abuzz for over a year.

The regulator decided to offer 65 Mhz of spectrum in three frequencies to GSM and CDMA operators — but steered clear of the controversial spectrum PCS 1900 Mhz which is still entirely occupied by the defence. The three frequencies in which the 3G spectrum will be offered are 450 Mhz, 800 Mhz and 2.1 Ghz.

Pricing formula

The pricing formula for 3G spectrum is still not clear. While the telecom ministry favours a top-up charge on existing licence fee that the telecom operators pay the government, the finance ministry wants to auction the 3G spectrum with the telecom regulator playing a middle-roader on the issue.

The regulator suggested a mix of fee and auction methods for 3G spectrum allocation that caps the revenue that the government could possibly earn from spectrum allocation for 3G and broadband wireless access services at Rs 1,500 crore. The lowball figure suggests that the regulator wants to allocate spectrum at moderate prices and avoid the bidding war that Europe witnessed a couple of years ago that forced telecom companies to offer 3G services at very high prices to customers in order to recoup the costs.

Maran said the spectrum for 3G services need to be priced rightly keeping in mind the scarcity of spectrum and fiscal deficit of the country.

“Our Asian counterparts have already launched 3G services. China is in the process of conducting its field trials and is expected to launch it soon. 3G will play a key role in taking India to the next level,” he said.

Trai suggested charging a maximum of Rs 80 crore as base price from operators for allotting 3G spectrum. “The base price for acquisition of spectrum for 3G services (has been) recommended at Rs 80 crore for category A circles, Delhi and Mumbai, Rs 40 crore for category B circles and metro Chennai and Calcutta, and Rs 15 crore for category C circles,” Trai chairman Nripendra Misra told reporters.

Mixed response

The Tatas were pleased with the Trai recommendations which puts the spectrum costs close to group chairman Ratan Tata’s suggested sum of Rs 1,500 crore against the Rs 300 crore that the rest of the industry had proposed in response to a consultation floated last May by the regulator.

Darryl Green, CEO of Tata Teleservices, said the recommendations were fair to all participants in the sector and are progressive in nature. “We are happy that the regulator has maintained an evidently technology-neutral approach. The recommendation on pricing and auction of spectrum clearly establishes that spectrum is recognised as a scarce resource and must be utilised efficiently,” he added. “Trai’s proposal on vacating spectrum in order to re-farm GSM operations and in the process allocate additional spectrum, in the 800 Mhz band, for CDMA players is a much needed and eagerly awaited solution. We welcome that move,” Green said.

Sunil Bharti Mittal, chairman and managing director of Bharti Airtel, said, “The base price is too high ... it would seriously undermine the goal of increasing telecom penetration through low tariff.” He added that Bharti would plead with the government to consider lowering the threshold price for 3G spectrum.

Officials from Reliance Communications Ltd did not comment on the Trai recommendations and said they were studying them.

Misra estimated a telecom firm would end up paying about Rs 1,400 crore if it wanted to take a 3G licence for the entire country. However, analysts said most telecos would prefer to take 3G service licences for metros where they would be able to find enough buyers for their high-cost service.

Analysts feel that the government could collect up to Rs 7,000 crore in the first round of bidding for 3G spectrum.

Stiff penalty

Trai has also suggested stiff penalty for hoarding and non-compliance of rollout obligations. However, the rollout will actually depend on the defence ministry vacating these airwave spaces.

Trai also recommended that 3G services should be considered on a stand-alone basis and would not be taken as an extension of earlier spectrum allocation for existing mobile services.

However, DoT officials feel that the two licences should be linked and cannot be separate. “You can’t auction someone just 3G unless one has an existing licence,” they said.

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