India's 3G, WiMax Rollout May Be Pushed to 2010

Government's wrangling over price, number of licenses delays auctions

By Swati Prasad

Nupur Singh Andley, senior research analyst for connectivity at Springboard Research, told ZDNet Asia in a phone interview: "It is doubtful that the private players will roll out 3G services within the next eight months. In fact, we may see the roll out of 3G and WiMax only in 2010."

Naveen Mishra, communications research analyst at IDC India, concurred: "We expect the launch of 3G and WiMax services by private operators to get pushed to at least the last quarter of 2009."

While the government were given 3G airwaves to state-owned telecom operators—Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL)—the launch of 3G and WiMax services by private players has been delayed.

In January, the Cabinet referred the proposal to auction 3G and BWA (broadband wireless access) spectrum to a group of ministers, thereby delaying the bid indefinitely. This was prompted by differences of opinion among ministries over the base price for the auctions and number of licenses to award.

While the Department of Telecom had set the base price for the pan-India 3G spectrum at US$406.6 million (INR 20.2 billion) and for the BWA spectrum at US$203.3 million (INR 10.1 billion), the finance ministry had demanded the floor price for both be doubled. The issue became further complicated when the Planning Commission, the Department of Industrial Policy and Promotion, and the IT ministry opposed moves to double the base price.

Mishra told ZDNet Asia in an e-mail interview that although leading telecom operators already ran trials of 3G services, they would need about six months from the allotment of the 3G spectrum to offer these services. This time lag is because telecom operators have not placed orders for 3G network equipment, which takes around six months to procure. Given the uncertainties over the auction, operators do not want to take risks and will place orders only after the auction.

Delay can hurt growth

Despite the global recession, the Indian telecom market has been growing at a fast pace of 50 percent per annum. India added 113.26 million new customers in 2008, taking the total number of mobile subscribers to around 350 million by end-December. India also added over 2.3 million broadband connections in 2008, registering a growth of more than 74 percent.

The market growth is happening on the 2G platform, even as 120 countries across the world have already migrated to 3G.

D. K. Ghosh, chairman and managing director of ZTE Telecom India, told ZDNet Asia in an e-mail: "It would be naive to expect the Indian telecom industry to keep following the growth trajectory, despite other industries facing the recession. If the current market scenario continues for another year or more, we might see the negative effects on the telecom industry."

Springboard's Singh Andley said: "Delay in spectrum allocation is demoralizing the sentiment, especially for international investors."

According to Ghosh, both 3G and WiMax technologies have the potential to put a virtual PC with a broadband connection in the hands of over 350 million mobile users in the country.

Industry reports estimate that a 10 percentage rise in mobile usage can lead to 0.5 percent increase in GDP (Gross Domestic Product). "Going by this estimate, the gains each year for India, which is already a trillion-dollar economy, could be as high as US$50 billion," Ghosh said, adding that the rapid adoption of 3G can solve the twin problems of low broadband and PC penetration.

"The delay [in the launch of 3G and WiMax services] has been hindering the growth of not just the telecom industry but also the country," he said.