The government has fixed a base price of Rs 3,500 crore for a pan-India license in the forthcoming 3G spectrum auction, nearly 75% higher than the price decided earlier at Rs 2,020 crore. The reason behind the higher base price was because the finance ministry wanted to make sure that government gets a reasonable price per unit of spectrum.
However, the actual price is likely to be much higher than what has been asked by the government. All leading operators like Bharti Airtel, Reliance Communications, Vodafone-Essar, Tata Teleservices and Idea Cellular are gearing up to place bids for 3G spectrum and have already started fund raising exercises. New licensees like Datacom Solutions and Unitech Wireless too are likely to try, though they might find it difficult if the bidding becomes really aggressive.
The government has also restricted the total number of players to five per circle, which means that after accommodating BSNL/MTNL in their respective circles, only four seats would be left for private players, further pushing the chances of aggressive bidding.
The Cellular Operators’ Association of India (COAI), the industry body representing GSM operators, currently expects 3G spectrum bids to begin at around Rs 5,000 crore. However, given the limited number of available slots and possibility of foreign players also bidding aggressively, the final price may go as high as Rs 8,500-9,000 crore in the event of an aggressive bidding scenario.
Such a development, however, may prove to be rather negative for the industry. Too high price of the spectrum would mean that winning companies would have to keep price of various 3G services at higher levels, thus raising doubts regarding how much time it would take telcos to reach a commercially viable number of 3G subscriber base.