Saturday, August 16, 2008

India - 3G policy squabbles

The Finance Ministry criticises the Department of Telecommunications (DoT)

The Finance Ministry has reproached the Department of Telecommunications (DoT) for the announcement of the 3G ie third generation wireless technology policy without consultations with and the approval of the Finance Ministry.It holds that the announcement of the guidelines for allotting the 3G spectrum which has financial implications for the Government needs to be approved by the Government under the Transaction of Business rules, 1961.


3G guidelines actually restricts the entry of new entrants and global operators as it rules that “if two players bid the same amount then the one with larger user base will enter the next round while the other will go on the waitlist. In case both the players have same user base then the one with higher adjusted gross revenue in the quarter before the auction will proceed to the next round. If there is a tie between bidders involving an existing service provider and a new entrant, then preference should be given to existing operators as they would be in a position to roll-out the services in a shorter duration of time.”

In the light of this situation, revenue receipts are likely to be less than half the target and hence the DoT guidelines are said to have financial implications for the Government.

However, Telecom Minister, A Raja reportedly expressed in an interview that there would be no change in the policy as the Finance Ministry had been consulted at every stage. The Department of Telecommunications refuted the allegation by saying that the Telecom Commission comprising of inter-ministerial representation from the Finance Ministry approved the 3G policy in November,2007.

He further announced that five to ten 3G licences will be auctioned per service area. Raja also issued 3G licences to state-owned BSNL and MTNL without waiting for the auction as they are expected to roll out their services within six months. The DoT also fixed the base price for the auction, which varied from Rs 30 crore to Rs 160 crore depending on the service area. A total of Rs 40,000 crore is estimated from the auction.

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