An array of conditions in third generation (3G) guidelines will restrict the entry of foreign players in the booming Indian telecom market. The restrictions may include an additional licence fee a foreign operator has to foot on, infrastructure hurdles and lack of a brand identity in the country, unlike in the case of a 2G operator.
"With current conditions, foreign players may not be interested in 3G auctions because they do not see a level-playing field. According to them, the conditions are biased and beneficial to the existing GSM and CDMA operators," said Ravi Sharma , CEO of Phi Group, an angle partner firm and advisor to foreign telecom companies.
Under the recent guidelines that have been placed before the empowered Group of Ministers for a final decision, foreign players can bid for 3G spectrum. However, on receipt of the spectrum, companies will have to acquire a Universal Access Service Licence after paying around Rs 1,650 crore (Rs 16.5 billion).
The base price of the 3G spectrum will be around Rs 4,040 crore (Rs 40.4 billion)to be finalised by EGOM), which would be an additional expense for a foreign player. As under the present set of regulations, existing 2G operators do not have to pay for the spectrum, as every company is assured the same on payment of the licence fee.
Allocation of spectrum should be decoupled from licence," Sharma opined.
However, this clause will not be a deterrent to foreign companies that have partnerships with Indian firms like Vodafone-Essar (UK-based Vodafone holds 67 per cent stake in the GSM operator), SingTel (30 per cent stake in Bharti Airtel) and Axiata (formerly Telekom Malaysia that holds 15 per cent in Idea Cellular).
The telecom ministry is expecting to start the 3G spectrum auction by end of this year after getting clearance from EGOM. The industry expects companies to rollout 3G services within 6 months of the auction.
According to a Mumbai-based analyst, 3G spectrum works better if used along with 2G radio frequency. It would be difficult for a foreign player without 2G spectrum to provide quality 3G services. However, if the government permits Mobile Virtual Network Operator (MVNO), a new entrant can take spectrum on lease from an existing player.
Another issue for foreign players would be building up their brand in the country, unlike the existing players. "An established brand helps a telecom company in faster accumulation of subscribers. But for a foreign player, it would take a while," said Accenture executive partner (India Lead Communication, Media and High Tech) Kumar S Ranjan.
A lack of readymade infrastructure would also hamper the entry of foreign players, when existing 2G operators would upgrade their infrastructure to support 3G services. Arun Gupta, Director (Business Development), Media Tek India Technology said, "Foreign players do not have network infrastructure and by the time it would be developed, their 3G services would be delayed.
"Under the set of guidelines drafted for the foreign players, they will have to fulfill various criterion (balance sheet submission and getting clearance from Foreign Investment Promotion Board) which makes it a complex and tedious task."
Media Tek is a US-based technology company for wireless communications and digital multimedia solutions.
The industry is expecting global majors like AT&T, Orange, Telefonica, Verizon, Sprint, France Telecom, O2 and Telestra to bid for 3G spectrum. However, these companies would have to rope in a partner - with infrastructure and licence - for a faster rollout.
Foreign players would look at acquiring stake in new 2G licencees like Unitech Wireless, Datacom Solutions and Loop Telecom to make a smooth entry into 3G space. Companies like Vodafone-Essar, SingTel and Axiata, are also expected to throw in their hats.
