Given the uncertainty over the availability of 2G spectrum, top officials in the department

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of telecom (DoT) forecast fierce competition among existing operators for acquisition of 3G spectrum. With the bidding for 3G spectrum scheduled to start by April, telecom analysts too see tough competition among operators for acquisition of spectrum.

A top official in the wireless planning and coordination (WPC), under the ministry of communications and IT, told Financial Chronicle: "At present, DoT does not have reserve 2G spectrum for allocation. Only once the ministry of defence vacates 2G spectrum, we will be able to allocate it. However, there is no immediate possibility of vacation of spectrum. This increases the possibility of more competition in the 3G auctions." WPC is the designated agency for spectrum management.

At present some new operators like Datacom, Swan Telecom and Uninor are waiting for start-up 2G spectrum. Telcos have already outlined their investment plans to bid for 3G and broadband wireless access (BWA). On Wednesday, chip manufacturer Qualcomm submitted its application to bid for BWA spectrum. Aircel on Tuesday said that the company has tied up with funds to bid for 3G and BWA spectrum. Major telcos such as Bharti Airtel, Vodafone, Idea Cellular, Tata is expected to place in their bids by Friday.

Principal analyst, Gartner, Kamlesh Bhatia said that spectrum is clearly the key driver for operators today. He said that 3G bidding is likely to see major participation from incumbent operators. “Incumbents are now seeking more spectrum as the subscriber base is growing significantly. From the operator’s perspective, acquiring 3G spectrum would enhance the capacity of the telcos and help in increase the subscriber base,” Bhatia said.

Research analyst from Karvy Broking, Harit Shah said, "The industry is waiting for spectrum allocation, as the networks are already choked. The auctions will witness the race for spectrum acquisition, which will enhance the capacity for the telcos. However, the competition will be mainly among the incumbents to acquire spectrum." He said for the new operators bidding for 3G spectrum is 'doubtful'. He added that for foreign operators 3G is not an attractive proposition as the operators would unlikely to be granted 2G spectrum.

Chief operating officer, Aircel, Gurdeep Singh said for Aircel as a new operator, it is not spectrum starved. "Telecom industry today is already witnessing hyper competition. 3G auction is likely to witness similar competition from bidders," Singh said. Fitch rating report states that the capital expenditure for telcos in fiscal 2010 is expected to be lower, however for fiscal 2011 it will be higher for the 3G license auction winners, assuming the 3G license fees and its subsequent rollout in fiscal 2011.

According to the memorandum of understanding (MoU) signed between ministry of communications and IT and ministry of defence in May 2009, defence ministry agreed to vacate 45 MHz (25MHz of 2G and 20 MHz of 3G spectrum) of spectrum to DoT for commercial allocation to telcos.

The MoU stated that the DoT would set up an alternative fibre optic network, which will be used for wireless communication by the defence. Defence had indicated it would release 10 MHz of 3G spectrum as a first step in three months and 5 MHz in 2G spectrum.

The project for setting up the alternative network was handed over to Bharat Sanchar Nigam (BSNL). BSNL invited the tender from vendors to set up the network which faced a roadblock after a number of vendors objected to the stringent guidelines of the tender. Chairman and managing director of BSNL Kuldeep Goyal said the PSU has written to defence ministry for modification in the guidelines of tender.