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IndiaWatch: Rising Stakes

1:05 PM -- An action-packed few days in India's mobile market has seen talk of rising 3G auction reserve prices, a freeze on 2G spectrum allocation, and further impending competition in the GSM services market.

India's Department of Telecommunications (DoT) is to put a proposal to the country's cabinet to increase the reserve price for the 3G license auction from 20.2 billion Indian rupees ($424.4 million) to Rs35.4 billion ($746.2 million), reports India's Economic Times.

It's a compromise that could finally put an end to objections from the Finance Ministry and remove a major hurdle stopping the auctions taking place.

The Finance Ministry has previously blocked the 3G auctions going ahead as it felt the reserve price was too low, suggesting Rs40.4 billion ($849.1 million) instead. It's expected to be more responsive to the higher price, especially as it's accompanied by an increase in the number of licenses from five to seven or eight, a move that will generate significantly more revenue for the treasury.

The increase in the potential number of licenses is made possible by the availability of more spectrum. (See India's Operators Set for Spectrum Windfall.) That additional spectrum also includes 2G bands. But according to a separate Economic Times report, which cites a senior DoT official, all 2G spectrum allocation is on hold until a final decision has been made on the methodology for allocating new spectrum.

All evidence suggests that auctions will replace subscriber targets: The report claims that the DoT is now to ask the Telecom Regulatory Authority of India (TRAI) to agree to its suggestions. Hopefully this will bring the issue to a speedy conclusion that will free up spectrum from India's ever-growing mobile subscriber base. (See India Auction Fever.)

Figures released by the Cellular Operators Association of India show that 8.3 million new GSM connections were added in May, taking the total GSM subscriber base to 306.4 million. Still to come are the May numbers from CDMA operators Reliance Communications Ltd. , Sistema Shyam TeleServices Ltd. , and Tata Teleservices Ltd. , which should be released in the next week.

Bharti Airtel Ltd. (Mumbai: BHARTIARTL) maintained its leadership by adding 2.8 million to secure 32.48 percent of the GSM market. Vodafone India was next with 2.5 million. Both maintained similar gains to the previous month. For further details, read this Economic Times story.

The next few months could see even greater increases in GSM subscriber uptake as CDMA operator Tata Teleservices is launching GSM services under the brand Tata DoCoMo. (See Tata Rolls Out GSM as Tata DoCoMo.)

When Reliance launched its GSM services, India's monthly mobile connections grew by a record 15.4 million. Reliance added a massive 5 million new connections in the first month after its GSM launch, although it didn't split out how many of those were GSM and how many CDMA. (See Reliance Launches National GSM and India Adds 15M Mobile Subs in January.)

The use of the DoCoMo name comes, of course, from Japanese mobile giant NTT DoCoMo Inc. (NYSE: DCM), which holds a 26 percent share in Tata Teleservices. Tata has said it will use DoCoMo's experience to help it launch applications such as location-based services and mobile payments, and that the two will work together on 3G and, ultimately, LTE developments.

Of course, Tata will need some 3G spectrum first...

— Catherine Haslam, Asia Editor, Light Reading

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