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Auction of 3G and BWA Spectrum in India – Revised Information Memorandum
www.dot.gov.in

 India's Department of Telecommunications (DoT) has published a revised memorandum related to the planned auction of Broadband Wireless Access (BWA) spectrum, which includes 3G and WiMAX licences. The deadline for potential applications has been set on 21 December, with the auction scheduled to start on 14 January 2010. The Indian government, which has recently doubled the reserve price for the BWA spectrum from INR20.2 billion (US$435 million) to INR35 billion, expects to auction four 3G licences and three mobile broadband licences in 20 of the 22 telecom zones.

This Revised Information Memorandum (the “Memorandum”) provides information for those parties wishing to bid for spectrum to support Third Generation (“3G”) mobile services and Broadband Wireless Access (“BWA”) in India. It supplements and updates the guidelines that were issued by the Department of Telecommunications (“DoT”) on 1st August, 2008 along with the amendments issued on 11th September, 2008 (“Guidelines”). Further, it substitutes the Information
Memorandum issued on 12th December 2008. Copies of these documents are available at the Auctions website.

In particular, the Memorandum:

Summarises the steps which Recipients need to take in order to pre-qualify and take part in the forthcoming auction for radio spectrum in the 2.1GHz band (the “3G Auction”), radio spectrum in the 800MHz band (the “800MHz Auction”) and radio spectrum in the 2.3GHz band (the “BWA Auction”) (together, the “Auctions”);

Summarises the rules and timetable applicable to the Auctions;

Provides background information on the Indian telecommunications market and the regulatory environment.

Recipients of the Memorandum (“Recipients”) intending to apply to pre-qualify for either of the Auctions should note that the information contained in the Memorandum does not purport to be complete. The intention of the Memorandum is to bring to Recipients’ attention a number of key issues. Recipients will need to undertake their own detailed investigations of the issues raised in the Memorandum and any other relevant issues.

The DoT will separately issue a Notice Inviting Applications for participation in the Auction(s) (the “Notice”). In the event of any difference between the procedures set out in the Memorandum and the provisions of the Notice (or any other applicable laws, regulations or other statutory provisions), the latter are definitive and take precedence.

The Government of India (the “Government”) is keen that potential new entrants to the Indian telecommunications sector, as well as existing operators, should be encouraged to take part in the Auctions. To this end, the Government is taking a number of pro-competitive steps to enhance the commercial attractiveness of the 3G and BWA business plans for all operators as well as to provide new entrants with the opportunity to bid for the spectrum being auctioned and subsequently roll out their networks on a more equal footing with existing operators. Some of these steps include:

Allowing Prospective New Entrants to apply for Universal Access Service (“UAS”) licences after the award of spectrum (but before start of operations);

Allowing foreign operators with experience of offering 3G services, wishing to enter the Indian mobile services market, the flexibility to bid for spectrum on their own and then transfer it to a Company incorporated in India;

Launch of the process for implementation of Mobile Number Portability (“MNP”), which is expected to become effective in the metro and A circles by December 2009;

Steps have been initiated for ensuring greater availability of spectrum over a period of time;

External Commercial Borrowing (“ECB”) guidelines have been relaxed to permit ECB up to US$ 500 million to finance spectrum acquisition fees in the 3G Auction.

Furthermore, the following measures are being evaluated by the Government:

Relaxation of ECB guidelines in respect of the BWA Auction;

Allowing the amount paid for spectrum through the Auctions to be treated as capital asset, which would be amortisable for tax computation purposes.

Decision on these measures would be taken in consultation with the Ministry of Finance.

The Government strongly encourages mobile network operators to share passive infrastructure such as masts and/ or sites and active infrastructure (excluding spectrum) such as antennas, feeder cable, Node B, Radio Access Network (“RAN”) and transmission systems in order to reduce the cost of deployment and to minimise the environmental impact of networks. Recent years have seen the growth of several telecom tower companies offering passive infrastructure sharing services.