Spectrum allocation delayed to year-end

New mobile players, 3G plans in trouble.

Rollout plans of nine mobile telecom companies that received letters of intent from the government last month and the launch of 3G (third-generation) wireless services by others face major problems with spectrum allocation delayed from June to the year-end.

The principal delay is because the defence forces, which are expected to vacate some spectrum for mobile service providers, are yet to identify locations for some sites for an alternative optic fibre network that is being developed for them.

Of the 162 sites to be developed for the alternative network, only 50 have been completed.

The department of telecommunications (DoT) had assigned the execution of the network to Bharat Sanchar Nigam Ltd (BSNL), India's largest telephony company, in April 2006. HCL Infosystems is one of the vendors for network equipment.

"It will still take another two to three quarters to complete the project," said a source familiar with the development. Spectrum refers to the radio frequencies that enable wireless communication.

The defence services are expected to vacate 45 Mhz of wireless spectrum (of which 25 MhZ is for 3G) for mobile services once they shift a part of their communication needs from a wireless to a wireline network.

Sources said demonstrations for the 50 sites are on and they can be operational as early as mid-March. However, DoT has not yet clarified whether the spectrum to the new licence-holders will be given in a phased manner or in one go. Crucial meetings between the ministry of defence and DoT are slated this week on the issue.

However, companies like Unitech, Shyam-Sistema, BPL, Swan Telecom, Datacom might have no choice but to wait till next year before they are allocated their initial spectrum, which might impact the viability of their projects.

New players will take at least six to 12 months to roll out after spectrum is allocated.

Incumbents already control 272 million customers. In the next year they are expected to add 70 million to 100 million new customers taking their total number of subscribers to between 340 million and 370 million.

By 2012, when the new players optimistically expect to be up and running, India's mobile market is estimated at 600 million. This means the new licensees plus CDMA incumbents Reliance Communications and Tata Teleservices that have been allowed to offer GSM services will be fighting for 200 million-odd customers.

The auction of 3G licences is also dependent on DoT being able to resolve the spectrum imbroglio with the ministry of defence.