India’s mobile phone firms began bidding to provide super fast third-generation (3G) services in the booming cellular market — a sale expected to reap the government billions of dollars.
The auction of 3G spectrum will propel India firmly into the Internet era where rolling out landline broadband networks has been costly and will heat up the battle for customers in the world’s fastest growing mobile market.
Leading Indian operators Bharti Airtel, Reliance and foreign backed Vodafone Essar and Tata DoCoMo are among the companies bidding in the 3G auction, the largest such sale globally in recent years, “The auction has started and it is going smoothly,” a telecom ministry official, who declined to be identified, said.
The government has budgeted to bring in at least INR 350 billion or eight billion dollars from the selloff of 3G airwaves and a follow-on auction of broadband wireless access spectrum that could take days or even weeks.
“The major operators will bid aggressively. It will be very important for them to win 3G slots to retain their high-end subscribers,” Kunal Bajaj, analyst at consultancy BDA Connect, said.
The reserve price has been set at INR 35 billion or $789 million for each of the three pan-India 3G licenses across 22 zones while the floor price for broadband spectrum that will begin two days after the 3G auction ends is INR 17.5 billion.
Only two broadband slots will be up for sale.
There are a total of nine operators bidding for 3G spectrum in the country of 1.2 billion people. But analysts expect the bidding to go much higher because of the severe crunch for spectrum — the airwaves that carry mobile traffic — in the congested mobile market which has over a dozen players.
“The bids should be double (the base price),” forecast Romal Shetty, executive director for telecommunications at KPMG’s Indian unit.
3G allows mobile phone users to surf the Internet, video conference and download music, video and other content at a much faster pace than the current second-generation or 2G service.
The auction is being carried out using Internet-based bidding with each contender having a password to obtain access to the sale process.
One government official told India’s Economic Times newspaper the 3G auction could last 15 to 20 days while the subsequent broad battles which have reduced calling costs to less than a cent a minute, analysts say.
India is the biggest major economy not to have widespread 3G services. Fellow emerging market giant China started offering 3G services last year.
The winners will be awarded spectrum in September, which means roll out of 3G services will be possible only by the end of 2010 or early 2011.
For at least the first year, the main focus is expected to be on improving call quality.
3G uptake in India is expected to be slow in the initial stages as 3G handsets are costlier than second generation handsets.