The Department of Telecommunications (DoT) has proposed that the reserve price of 3G spectrum for pan-India operations should be fixed at Rs 3,500 crore. The amount proposed by the department to the empowered group of ministers (EGOM) is about Rs 540 crore less than the reserve price suggested by the Finance Ministry.
While the Finance Ministry sees the spectrum for 3G services, which are aimed at high-end uses such as video downloads and mobile commerce, as a revenue-earning opportunity, the DoT, pushing for a reserve price, has argued that a high
reserve price for category “B” and “C” circles would discourage smaller players.
DoT has categorised telecom circles – whose boundaries roughly coincide with the boundaries of a state -- into four categories – Metro, A, B and C. Metro and Category A are high potential circles, while B and C, typically reaching smaller or less affluent states and towns, are seen as low-potential.
Category C circles include Himachal Pradesh, Bihar, Orissa, Assam, North East and Jammu and Kashmir, which are either economically backward or face peculiar political or ecological conditions making business tough.
The Category B circles are Kerala, Punjab, Haryana, UP (East), UP (West), Rajasthan, Madhya Pradesh, and W Bengal.
The Finance Ministry’s proposal of a reserve price of Rs 4,040 crore for pan-India 3G spectrum envisages a reserve price of Rs 160 crore for B circles and Rs 60 crore for C circles. For Category A and the top metro zones of Delhi and Mumbai, the reserve price is Rs 320 crore.
DoT has said that only one block of spectrum is available for private players in Rajasthan. One block of spectrum is 5MHz of spectrum. This means there can be only one private 3G player in Rajasthan. In case DoT allots spectrum to one player, there will not be any spectrum left for expansion of services.
In Delhi and Gujarat, there are only four blocks of spectrum available for private players. However, the problem is if all four blocks are auctioned, the operators would not be able to expand once the initial spectrum is exhausted. Delhi and Gujarat are high potential circles.
The department has already allotted 3G spectrum to Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd. However, they will have to match the price at which spectrum is issued to private players.