Fresh trouble appears to be brewing over non-vacation of spectrum by Defence Ministry, a move that could frustrate the Telecom Ministry’s scheduled auction of third generation (3G) radio frequency next month.
The Ministry of Defence is understood to have told the Telecom Ministry that only 10 MHz of 3G spectrum can be vacated and that it is still using the frequency allotted to BSNL/MTNL - which effectively means that the spectrum available for sale can accommodate only one private player.
Originally, the spectrum was to have been auctioned to four mobile operators, not counting PSUs BSNL and MTNL.
According to sources in the know, some interference in the frequency allotted to BSNL and MTNL for 3G mobile services has been witnessed with the MoD saying that it is used by them from security point of view.
This leaves only one slot of 3G spectrum to be auctioned - scheduled for January 14 next year - as out of 10 MHz spectrum vacated by Defence one slot of five MHz would go to the two telecom PSUs.
DoT is looking into whether it would make economic sense to go ahead with the auction with only one or maximum two slots of air waves, which may fetch higher prices but far less revenue than the over Rs 25,000 crore it had calculated.
At the time of entering into an agreement with the DoT, the MoD had clearly stated that it would vacate 10 MHz of spectrum for commercial use, in addition to the one allocated to BSNL/MTNL. This was to be over and above the airwaves already available with the DoT.
The empowered Group of Ministers (eGoM) is likely to meet tomorrow under the chairmanship of Finance Minister Pranab Mukherjee to deliberate on the issue and take a final decision on how many slots of 3G spectrum is to be put on sale in the forthcoming auction.
Officials had earlier pointed out that the Ministry of Defence was supposed to vacate another 10 MHz of spectrum by June, 2010. Now, this may not be the case.
The government has fixed the reserve price of spectrum at Rs 3,500 crore for pan-India 3G spectrum and Rs 1,750 crore for Wimax (wireless internet/broadband).
It had projected a revenue of Rs 25,000 crore from the sale of spectrum, but this could now fall short of estimates.
In case of Wimax, it could not be ascertained whether or not the same number of slots (four) would be auctioned as the required spectrum for wireless broadband was available.
The loss in revenue could be more due to aggressive bids. Bidders are expected to offer more than the reserve price.