More Delays to India's 3G License Auction

Yet another delay in the long running saga of India's 3G license auctions seems likely following various media reports at the weekend.

It is being rumoured that not only does the Law Ministry want the terms of the license auction to be revised, they are also concerned that auctioning off radio spectrum before it has been vacated by the military could lead to legal challenges for compensation.

The government had been expected to complete the 3G auction by March and raise around US$7.6 billion for the Exchequer. However the delay also pushes the sale into the next fiscal year, affecting the government's finances for this financial year.

The expected delay comes despite a last-minute push by the government and departments to get the auction launched before the end of this financial year on 31st March. The main sticking point is that some of the radio spectrum that would be sold is still occupied by the military, who have proven stubborn when asked to vacate their holdings. There are concerns that selling radio spectrum which might possibly not be released by the military could lead to claims for compensation from the 3G license holders.

The government has sufficient spectrum to auction two 3G licenses, while spectrum for the third license is expected to be available by September. The fourth license in those circles which can support it is may not be available until 2013.

The delay would also be good news for the two state-owned telecoms operators, BSNL and MTNL who are already running 3G networks, although with anemic subscriber sign-up rates. Every month of delay makes it more likely that potential customers waiting for the private networks may decide to sign up with the state owned companies just to get access to the service.