New Delhi, Aug. 1: The Congress-led government today announced it would hold a global auction later this year for high-speed third-generation (3G) mobile services with the prospect of raising over Rs 20,000 crore.

Five licences will be offered initially and could be gradually scaled up to 10, telecom minister A. Raja told reporters here today.

The global auction of spectrum — or airwaves — in the 2.1gigahertz (Ghz) band is likely to be completed in the next two months. Mobile telephone companies will then be able to offer 3G services by the middle of next year.

The third-generation, or 3G services, will enable faster video and music downloads.

Communications minister A. Raja told reporters that five operators would be allotted 3G spectrum now. Five more would be accommodated later.

“Spectrum in the 2.1 Ghz band will be allocated for 3G telecom services throughout the country,” Raja said. India has 60 megahertz (Mhz) of 3G spectrum available, and will allow both GSM and CDMA 3G services.

“We may give licences to up to 10 operators. It depends on the availability of spectrum. Initially, we will have five players. In Delhi and Mumbai, there will be two private operators only. The licence will have a validity of 20 years,” Raja said.

He said state-run BSNL and MTNL would be allotted one slot of the 3G spectrum. MTNL will get a 3G block in Delhi and Mumbai, while BSNL will get a block in all other telecom circles, at a price equal to the highest bid in the circle.

He said a reserve price of Rs 160 crore had been fixed for Delhi, Mumbai and all “A” category circles.

The reserve price for Calcutta and other “B” category circles has been put at Rs 80 crore, while operators in the “C” category would have to stump up Rs 30 crore.

Officials said the base price for a pan-India 3G licence would be Rs 2,020 crore.

The 3G spectrum fee would be 1 per cent of the adjusted gross revenue from the second year and there would be no annual spectrum fee in the first year.

Stocks leap

Most telecom stocks vaulted after the government announced guidelines for the 3G auction, with the lone exception of Reliance Communications.

The shares of Bharti Airtel opened at Rs 788 and gained 2.48 per cent, or Rs 19.85, to close at Rs 819 on the BSE after the company said 3G services would be rolled out within six months of receiving spectrum.

MTNL rose 3.76 per cent to close at Rs 107.70 after Raja said one block of spectrum would be reserved for MTNL in Delhi and Mumbai circles. Idea Cellular also gained marginally (0.74 per cent) before closing at Rs 88.95.

However, R-Com shares plunged around 12.65 per cent today in the first trading session after yesterday’s disappointing first-quarter numbers.

The R-Com stock opened at Rs 500.35 this morning and slumped immediately, hitting the day’s low of Rs 410.05.

Analysts say that the biggest attraction is the fact that India surpassed the US this year as the largest wireless-phone market after China, with 287 million subscribers at the end of June, more than the combined populations of Germany, Japan and the UK.

The 3G guidelines, proposes to auction 3G spectrum in the 2.1 Ghz band for GSM players. Later, the CDMA players will get radiowaves in the 800 Mhz band.

The 3G spectrum can be used both for voice and high-speed data applications such as downloading movies so any new player who wins the bid for 3G spectrum can also enter the traditional voice and SMS market. At present, all telecom services in India are offered on 2G. Winners will not be allowed to trade or resell spectrum and they will not be allowed to merge in the first five years after the grant of licence.

Officials said in all about 30Mhz of spectrum will be sold through the auction.

The government will also auction licences for broadband wireless (WiMAX) services, with the reserve price fixed at 25 per cent of the amount for 3G spectrum, they said.

“The 3G policy and auction guidelines would allow for an open, global and transparent auction process consistent with international best practices,” said Ficci president Rajeev Chandrasekhar, who had founded BPL Mobile, before selling it off.

T.V. Ramachandran, director-general of the Cellular Operators Association of India said, “The government’s plans to allocate additional spectrum should ensure the fullest possible breadth of competition in 3G services.”

Fierce bidding war

Market watchers said the government's 3G guidelines were along expected lines, but warned that competition would be very aggressive for Delhi and Mumbai.

“It’s a pity that lucrative markets like Delhi and Mumbai will have only two private players each. The bidding here is bound to be very fierce,” said an analyst at Angel Broking.

Experts warned that the 3G auctions in India would not rake in as much revenue as the auction in the UK and Europe had done.

“The kind of numbers we saw in the UK won’t be possible in India. It’s highly unlikely and if it happens, it will be bad for the business,” said the market watcher.