India is holding an online auction of 3G spectrum on Friday, to be followed two days after the auction is complete by the auction of spectrum for broadband wireless access (BWA).
This is the first time India is auctioning spectrum for mobile services. For second-generation mobile services, the government allotted licenses and spectrum on a "first-come-first-served" basis at a fixed price.
That procedure is currently under investigation by the country's Central Bureau of Investigation, as it is alleged that the Department of Telecommunications (DOT) offered the licenses at very low prices, and arbitrarily stopped issuing new licenses.
Both the 3G and BWA auctions, originally scheduled for January last year, were postponed three times for a variety of reasons, including a delay by India's defense ministry in releasing spectrum for civil use.
The government hopes to raise about US$8 billion from the 3G and BWA auctions. The spectrum will be released to winning bidders by September.
The auction for 3G spectrum will have nine bidders, but has drawn interest only from existing mobile operators in the country, according to data on applicants released by DOT.
Current players have already invested in the market, and on infrastructure, and will sell 3G services to their large customer base, said Kamlesh Bhatia , a principal research analyst at Gartner. New entrants may prefer to acquire operators later, rather than invest now in licenses, infrastructure and acquiring customers, he added.
Among the bidders for the 3G auction are Vodafone Essar, the Indian joint venture of Vodafone, and Bharti Airtel, the country's largest mobile services provider.
Six operators -- Bharti Airtel, Reliance Communications, Vodafone Essar, Tata Teleservices, Idea Cellular and Aircel -- are bidding for spectrum in all 22 service areas in the country. Three other bidders will bid only on select areas.
For 3G services, the government has decided to auction three blocks of 5MHz of paired spectrum in the 2.1GHz band in 17 of the country's 22 service areas, with four blocks up for bidding in the remaining five service areas.
For the BWA auction, the government plans to auction two blocks of 20MHz unpaired spectrum in each of the 22 service areas.
A block each of 3G and BWA spectrum in each of the 22 service areas has already been allotted ahead of the auction to government-run service providers, who have already rolled out services in some parts of the country.
The BWA auction has 11 bidders, including Qualcomm which said that it would set up a joint venture under Indian rules, and set up a network to operate services using the TD-LTE (Time Division Long Term Evolution) standard. It would later exit from the joint venture after the network is in operation, as its objective is to promote the TD-LTE standard, the company said.