India Faces Further Delays to its 3G License Auction

India faces further delays to its 3G license auction after the Finance Ministry recommended a doubling of the reserve price for the licenses for each circle. Last week, the Department of Telecom (DoT) announced that the auctions, which were scheduled to start on Jan 16th, had been postponed to Jan 30th, as the government has not yet approved some key parameters.

The auction is due to start with a reserve price of US$412 million for licenses which would cover all the available circles.

The extra delay is understood to be possible following a dispute between the Finance Ministry and the DoT which had approved the lower reserve price. The Finance Ministry is concerned that the lower price does not reflect the expected high demand for mobile services - although as the price is simply a reserve, it is anticipated that bidding will push the eventual prices much higher for the competitive Metro circles.

The Finance Ministry is understood to be looking to double the reserve prices, which could - with competitive bidding - push the cost of a nationwide license to over US$1 billion.

Foreign companies will be able to bid for a license on their own - but will then need to find a local partner willing (and able) to take a 26% stake in the company.

The current auction guidelines (pdf file 136 pages) can be downloaded from the Department of Telecoms website.

Auctions for WiMAX licenses will commence two days after the 3G licenses are sold.

Posted to the site on 5th January 2009