India Sets Auction Prices for Telecom Frequencies

NEW DELHI--India's federal cabinet on Monday approved the starting prices for auctioning telecommunications bandwidth to cellphone operators as it seeks to raise 648.40 billion rupees ($10.24 billion) through nontax routes to improve the country's weak financial position.

The cabinet approved 36.46 billion rupees as the price for one set of bandwidth in the 800 MHz frequency category, meant for offering cellphone services using code division multiple access, or CDMA, communications technology, according to a government statement.

The cabinet also set the price for bandwidth in the 900 MHz and 1800 MHz categories at 39.80 billion rupees and 21.91 billion rupees, respectively. These two frequencies are used by operators to provide cellular services using the more popular global system for mobile communications, or GSM, technology.

Frequencies in the 900 MHz bandwidth won't be sold in the Delhi, Mumbai, Kolkata, Jammu and Kashmir service areas, while auctions for the 1800 MHz frequencies won't be held for Maharashtra and West Bengal, the government statement said. The government won't sell frequencies these service areas as it doesn't have bandwidth to put on auctions.

The government plans to carry out the auctions in February.

The money raised through the auctions is crucial for the government to boost revenue and contain its fiscal deficit within a targeted 4.1% of gross domestic product for the year through March.

In the budget presented in July, the government projected revenue of 454.71 billion rupees from the frequency auctions this fiscal year. However, late Monday it raised its estimate to 648.40 billion rupees and said from that figure, the government will get about 160 billion rupees during this fiscal year through end of March. The figure doesn't include estimates for funds to be raised selling frequencies for 3G services.

Telecom operators keenly await the auctions. For the country's top four operators-- Bharti Airtel Ltd., the Indian unit of Vodafone Group PLC, Idea Cellular Ltd. and Reliance Communications Ltd.--the auctions are important in ensuring operations in some parts of the country where their permits are close to expiration.

Other operators such as Norway's Telenor ASA and Russia's Sistema JSFC want more bandwidth to expand into new service areas.

Fresh bandwidth would also allow companies to offer high-margin Internet and multimedia capabilities on cellphones and tablet computers.

Write to Rajesh Roy at [e-mail] and R. Jai Krishna at [e-mail]

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