In a surprise move that could deprive it of over Rs 5,000 crore in revenue, the government has said the 3G telephony spectrum available with it for sale currently could accommodate only three operators.
A fourth slot has already been awarded to state-owned MTNL (that operates in Delhi and Mumbai) and BSNL (rest of India). It had earlier planned to auction spectrum to four private bidders, in addition to the state-run firms.
The decision comes in the wake of the Ministry of Defence's reluctance to vacate the designated spectrum (air waves) for commercial use, official sources said, adding that the required notification would be issued soon.
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 ineternet/broadband) and the auction is scheduled to begin from January 14 next year.
The government had projected a revenue of Rs 25,000 crore from the sale of spectrum, but this could now fall short of estimates as it would have to forego at least Rs 5,250 crore due to cancellation of one slot.
Asked if the decision would require Empowered Group of Ministers' nod in view of the change, officials said it has been discussed by the members and would be formally notified.
On the issue of the Ministry of Defence refusing to vacate the spectrum, the officials said as per their Memorandum of Understanding with the Department of Telecom (DoT), 10 MHz of spectrum was vacated immediately and another 10 MHz would be given by June, 2010.
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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.
The DoT officials also said that notice inviting bidders would be issued soon as part of revised Information Memorandum released last month.