India 3G auction may happen sooner than expected

Analysts have reason to believe that the long awaited Indian 3G spectrum auction may take place sooner rather than later, although its expected impact on competition and technology is thought to be vastly overstated.

Industry analyst Ovum said this week that most of the contentious issues blocking the auction have been resolved and is cautiously optimistic about the release of spectrum in coming months.

The auction of 3G spectrum, originally due to take place at the end of 2008, had been continually delayed due to ongoing disputes between the government and the regulator, and pundits had even expected it to be delayed until year end.

However, Ovum warns that the government still has to make a decision on key issues such as the amount of spectrum to be released and the number of players allowed to participate in bidding.

Incumbents in the Indian wireless market are in immediate need of 3G spectrum to add capacity to their strained networks and to offset decline in average revenue per user (ARPU) by launching high end value added data services. The country is on target for 500 million fixed and mobile phone connections by 2010, the vast majority of which will be wireless.

But while this decision will have little impact on technology evolution, it will have important implications on the ability of the smallest two of the existing six private big players to participate and win spectrum.

”The 3G spectrum auction is unlikely to attract additional new players or entice most of the new 2G licensees to participate”, said Amit Gupta, principal analyst for Ovum. However, the government’s decision on the number of available 3G blocks to be auctioned will have some ramifications on the competitive landscape. “If all the blocks are auctioned then the smallest two of the six probable bidders – namely Idea and Aircel – might increase their chances and affordability of acquiring spectrum.”

State owned operators BSNL and MTNL have already been allocated 3G spectrum, giving them a substantial head start over 3G rivals.

Ovum also believes that 3G evolution for both GSM and CDMA operators is clear, with both types of operator likely to adopt LTE. “Although 3G spectrum in India is much needed and should be auctioned soon, its impact on competition and technology evolution is overstated,” Gupta said.