3G auction likely to benefit big telecom companies

As the bidding for spectrum for 3G or high-speed internet services is finally likely to happen this year, experts agree that it will change the face of the Indian telecom sector - but in different ways compared to more developed economies.

The difference will be largely caused by the stunted and curtailed extra spectrum on offer – four lots of 5 MHz each. This means that apart from state monopolies Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd - which have been allotted 3G spectrum out of hand, without having to bid for it – only four other companies will be able to provide the services.

Actually, the auction itself could well be further delayed, as it depends on the defence services vacating some of the spectrum they are hogging. They have agreed to do so, provided a fibre-optic network is in place to replace radio waves. But putting up such a network could take quite a while; which would mean that even the prospective four lots could be reduced to two or three.

As and when the auction does happen, analysts say it is likely to lead to two things – it will trigger a consolidation among telecom service providers; and the successful bidders are likely to use the additional spectrum to enhance voice and other 2G services before they focus on genuine 3G services.

With the Department of Telecom having put off allocation of additional 2G spectrum till end-November (See: DoT bows to TRAI on spectrum policy delay), operators are finding it difficult to accommodate the huge surge in subscribers on the limited radio waves available to them. More than 17 million subscribers are being added each month.

Existing telecom players are thus already facing a spectrum crunch; and are likely to initially use the 3G spectrum to provide improved voice calls to customers.
Voice services currently account for more than 85 per cent of a telecom company's revenues, while the 3G services being currently offered by BSNL and MTNL have found pitifully few takers.