The government has announced the 3G spectrum guidelines.

Telecom Minister, A Raja said the government would invite global bids for the 3G spectrum. Five operators will be allotted the 3G spectrum as of now and five more operators are expected to be allotted the spectrum on a later date. He added that BSNL, MTNL would be allotted one slot of the 3G spectrum today.

Currently 60 Mhz of the 3G spectrum is available. Raja said that three slots of the 3G spectrum would be allotted to CDMA players. He added that only two or three operators would get the 3G spectrum in Mumbai and Delhi. He said that the reserve price for Pan India 3G Auctions would be Rs 2,020 crore.



A Raja said that the rollout obligation of the 3G would be the same as that of the 2G spectrum. He further said that the 3G-spectrum fee is to be 1% of the adjusted gross revenue from the second year and there would be no annual spectrum fee for the 3G auction in the first year.



Raja expects the auctions to be completed in two months. Raja said the bid winner could get 20 Mhz of spectrum for broadband. He said the auction crosses would be conducted by a specialised agency. He also said that the the ministry would implement the mobile number portability by mid 2009.



Kuldeep Goyal, CMD, BSNL said that his company would be rolling out 3G services within six months. The prices could be higher than the base price that the government announced, he said. Goyal said that MTNL would operate in Delhi and Mumbai and BSNL in rest of India. He estimates a good market for 3G services.



Goyal said that ITI has presented a merger proposal with BSNL, which the BSNL employees have opposed.



Sanjay Chawla, JPMorgan said that the base prices have increased compared to what the TRAI suggested. He added that the risk of high price is to be paid by the telecom companies. He expect the bid price to be very significant and said it could hurt MTNL.



Excerpts from CNBC-TV18's exclusive interview Sanjay Chawla:



Q: What does it strike you as? Who are the winners and losers now?



A: We are still waiting for the fine print and the detailed guidelines from the DoT. Based on what the Minister has said, it is pretty much in line with what we had been anticipating, based on the press reports.



The base price has increased as compared to what the TRAI had suggested. It is a pretty hefty price at over Rs 2000 crore.



Since most of the potential is in the metro circle and the ‘A’ circles, it is very likely that the ultimate bid price for these circles could shoot through the roof and that is a risk. The premium that operators would eventually end up paying for circles like Mumbai and Delhi over the base price could be pretty significant, whereas for the remaining circles the premium over the base price may not be that significant.



Given the fact that one slot is already going to be allotted to MTNL and BSNL and that in Mumbai and Delhi there might be just one or two additional slots, I expect the bid price to be pretty significant.



In that scenario, it is going to hurt MTNL because they may be required to pay the same price for the 3G license and the spectrum.



Q: Do you expect it to hurt even the other players like Bharti, and Idea who would be seriously bidding for it?



A: Yes. But ultimately to some extent a high bid price from a Bharti or a Vodafone can be justified because they have that kind of a customer base. But for a complete newcomer they may get deterred looking at the aggressive bidding and the prospects of bidding in the market.



Q: Just a quick word on R Com, I believe you would be one of the analysts who has got a negative view after the kind of results that came out. Assuming that they bid on a very high frame from hereon for the Mumbai and Delhi circles, since in the concall they said that they want CDMA in both these circles. How negative could it turn out for R Com from what it already is?



A: I would not specifically point out this issue for R Com. The government has raised the base price and have opened the door to completely new entrants, the cost of just the spectrum acquisition could be pretty significant.



In this environment, investors are just going to write off any original capex. For example; if Bharti ends up paying say USD 600-700 million for pan India 3G spectrum and they may incur additional overall network cost of USD 500 million initially. Investors may just want to write off USD 1 billion initially.