Report on :- 3G Mobile Spectrum Auctioning in India

Submitted to :- Dr. Nityesh Bhatt, Institute of Management, Nirma University.

Course :- Management Information Systems, MBA PT 2010-13, 1st Year II Term.

Group Members:-

Nehal Roy – 102127

Darshan Parikh – 102108

Jose Kutty Thomas – 102114

Abhay Dholakia – 102101

3G Mobile Spectrum Auctioning in India

3G Technology in Brief

GSM Mobile Technology Services Offered Data Speeds

Generation’s
1G Analogue Voice Only Not Capable
2G Voice + SMS Upto 9.6 Kbps
2.5 G Voice + SMS + GPRS Upto 170 Kbps
2.75 G Voice + SMS + EDGE Upto 384 Kbps
3G Voice + SMS + HSDPA Upto 7.2 Mbps (Triband)
Upto 3.6 Mbps (Single Band)

Existing Indian Telecom Networks at 2.75 G, with 3G enable networks, telecom service providers will
be capable of providing speeds 10 – 20 times faster. Further the new frequency spectrum provides
plenty of new capacity for operators.

Issues with 3G Implementation in India

Very scarce 3G spectrum is available for commercial use.

3G spectrum is used by Defence forces since decades for their internal secure communications. Non
availability of alternate secure mode of communication, the remaining 3G spectrum held by Defence
forces could not be allotted for commercial use.

Govt. taking steps to implement internal state of the art secure fibre optic cable network for all
Defence units across country.

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Debate over 3G Spectrum allotments

There had been clearly two lobbies among the group of telecom service providers, proposing of
allotment of scare spectrum by way of free distribution and other group proposing open auction.

Further Govt. also needs to decide the number of applicants for 3G spectrum. Limiting to existing 2G
providers or opening Indian Telecom Sector directly to multinational players by way of FDI and how
much should be the limit.

Existing 2G Spectrum Allotment Process

Telecom Ministry while allocating the 2G spectrum among new entrants followed simple rule of First
Cum First Serve basis, with respect to date of application for spectrum and paying fixed spectrum
fees that was fixed and remain unchanged since the time of first spectrum allotment almost atleast 6
years before.

Further to allotting each applicant with minimum spectrum, Telecom Ministry for allocating
additional spectrum laid down criteria of number of subscribers served in a given service area.

The drawback clearly was, existing major players having majority of spectrum. The spectrum allotted
was in different frequency bands, creating small bunches of frequency across the band for each
operator. This leads to low utilization of spectrum and hence spectrum inefficiency.

Competing technology to GSM 3G (UMTS Vs EVDO)

3G or Mobile Broadband as we conventionally call to GSM 3G or technically called UMTS (as defined
by ITU) is not the only technology capable of providing high speed wireless connectivity.

Other is Cdma2000 works on existing CDMA networks. Cdma2000 1xRTT, cdma2000 1xEVDO
(EVolution, Data Only) and future cdma2000 3x were developed to be backward compatible with
cdmaOne. Both 1x types have the same bandwidth, chip rate and it can be used in any existing
cdmaOne frequency band and network so no additional spectrum requirement. In India this services
are offered by Reliance Communications and Tata Indicom under brand names “Reliance Broadband
Plus” and “Tata Photon Plus” respectively.

While UMTS was developed mainly for countries with GSM networks, because these countries have
agreed to free new frequency ranges for UMTS networks. Because it is a new technology and in a
new frequency band, whole new radio access network has to be build. The advantage is that new
frequency range gives plenty of new capacity for operators.

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Allocation of 3G Spectrum through Auction

Telecom Ministry, after many years of discussions and consultation, brought out with the guidelines
of auctioning of 3G spectrum and Broadband Wireless Access (BWA) spectrum. UK investment bank
NM Rothschild, advised DoT for the telecom auctions.

Experts said bidders have greater manoeuvrability in a multi-round auction process. Under tender-
based auctions, bidders had to submit one-time bids that could not be revised. However, in the
ascending e-auction format, bidders know the highest bids in each round and how many players are
in the race. Bidders also have the flexibility to match the highest bids. With lock-ins in place, it is also
difficult for bidders to leave or enter the process midway. A multiple-round auction is more time
consuming. The 3G auctions, for example, took over one-and-a-half months to be completed with
around 180 rounds of bidding.

E-auction model adopted for 3G spectrum and BWA auctions helped the government raise Rs
1,05,000 crore, against a targeted Rs 35,000 crore. This helped to meet the fiscal deficit target of 5.5
per cent of gross domestic product (GDP).

The government wants auction of projects across sectors. It is evaluating the extent to which the 3G
spectrum auction model can be replicated in areas like real estate, highways and FM. Officials from
the telecom ministry have been told to prepare a detailed presentation on the e-auction of 3G &
BWA.

Highlights of 3G Spectrum Allotment

 BSNL the only operator with PAN India 3G License & paid over INR 16828 Crores.
 Aircel, Bharti & Rcom, each won bids in 13 circles, followed by Idea (11), Tata (9) & Vodafone
(9).
 STel is surprised winner of 3G spectrum in 3 circles, namely Orissa, Bihar & HP.
 Bharti paid for spectrum in 13 circles closing it to INR 12295 Cr, followed by Vodafone’s price
in 9 circles at INR 11671 Cr.
 Tata has lost bids in Delhi & Mumbai each, but made it to Maharashtra & Gujrat.
 Airtel lost bids in Maharashtra & Gujrat both. Same is true for Vodafone in Karnataka.
 Aircel has won bids in all presence dominating circles in South India, North East & Kolkata.
 STel paid smallest amount, INR 337 Cr to grab 3G spectrum in 3 circles.
 J & K was the cheapest 3G circle sold at INR 30 Cr, followed by HP at INR 37 Cr.
 Bharti, Voda & Rcom won bids in Mumbai & Delhi.
 Government is expected to get INR 50968 Cr as total amount via 3G spectrum sale.
 Punjab, Bihar, WB, HP & J&K are having 4 successful 3G bidders. For all other telecom circles
there’re 3 successful 3G bidders.
 In all telecom circles spectrum allocated is between 1959 MHz to 1979 MHz band.

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