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After four delays, India’s 3G auctions are likely to take place this year. The auction is expected to take place in August-September this year. But the reaction of India’s mobile carriers is more fear than cheer, says Business Week. The government hopes to collect a total of $5.5 billion for four national and 22 regional licenses, but a price war has driven calling rates to well under 1 cent per minute, slowing the industry’s profit growth.

Currently, all services offered by Indian telcos, except select offerings by state-owned telcos BSNL and MTNL, are done using second generation (2G) networks which largely cater to the voice market. Following the auction of 2.3GHz and 2.5GHz licenses, 3G and 4G broadband will be available.

Carriers will need cash to bid on spectrum, and building a nationwide network will cost each as much as $4 billion. “Operators need to be realistic and not overbid,” says Naveen Mishra, an analyst at researcher IDC.

India’s state-owned BSNL, which the government allowed to launch 3G a year ago, now offers service in 300 cities, but has just 700,000 customers, and has cut tariffs at least twice. BSNL is the sixth largest cellular service provider, with over 57.22 million customers as of December 2009 and the largest land line telephone provider in India.

“Now we have to spend billions of dollars on a network that 2% of the country will use?” grumbles a senior finance official at Bharti Airtel, the country’s leading carrier, with 116 million customers. Bharti is now the world’s third-largest, single-country mobile operator. “It’s not like everybody in a village is carrying a BlackBerry (RIMM),” adds an executive, who asked not to be named because Airtel’s official policy is that it’s eager to offer 3G to the Indian masses.

India is the second-largest telecom market in terms of subscriber base, after China. As of end December 2009, the total subscriber base stood at 562.21 million, of which, mobile users accounted for 525.15 million. In the month of December, there was a record addition of 19 million mobile subscribers.

But some fear the auctions will lead to consolidation and greater foreign control of India’s cellular business. The top three operators hold just over half the market, while dozens of smaller players scramble for the rest.

Foreigners are eager to buy in. Some of the global giants — Telenor, NTT-DOCOMO, Etisalat DB, MTS have made their entry into the market recently. In 2008, Japan’s DoCoMo (DCM) paid $2.7 billion for 26% of Tata, the country’s No. 4 operator, and Russia’s MTS bought 74% of Shyama TeleServices. Norway’s Telenor took an interest in another small player last year.

The auctions for licences for 3G and WiMax wireless broadband services could raise 250 billion rupees (5.39 billion dollars) for the cash-strapped government, Communications Minister A. Raja said last August.

Currently, the number of people using broadband in India is relatively low. There are only 4.5 million users out of a population of 120 million. It’s a great opportunity for WiMAX operators to increase their coverage area. It is predicted that there will be 27 million WiMAX users in India before 2012, which would account for 20% of the worldwide WiMAX market.

India is divided into 22 major telecommunications circles based on geography. The Government has decided to assign by auction up to 3 blocks of 5×2 Mhz of paired in the 2.1 Ghz band in each of the 22 circles.

In other news, MVS Comunicaciones, a Mexican company, has reached a preliminary agreement with Clearwire to invest $700 million in WiMax technology in Mexico. The deployment will cover 23 Mexican cities.

MVS delayed the spectrum auction in Mexico, arguing that Secretario de Comunicaciones y Transportes should renew licenses in the 2.5 GHZ bandwidth before the process begins. The SCT is auctioning off space in the 1850MHZ-1990MHz and 1710MHz bands. Under the current rules, the government will have control over a total of 120MHz split into two blocks, with nine blocks of spectrum in the 1850-1990MHz band in eight of the country’s nine operating regions. Another seven blocks between the 1710MHz and 2179 MHz will be offered in all nine regions in a separate auction.

Deployment of the wireless broadband network, with the new technology, will take place by the second half of 2010, which is subject to its licenses being renewed.

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