We do not expect meaningful deviations on the policy front from the government’s earlier term. The government may however provide clarity/ take decisions on the following.

3G auctions – 3G auctions could not materialize during the planned Jan 2009 month due to delays in procedure clarifications. We believe that 3G auctions may materialize in CY2009.

Concessional license fees and increase in spectrum charges – DOT had issued notification for concessional license fees of 2% of AGR in non-Metro circles in case any operator reaches coverage of 95% of developmental blocks in a circle. The DOT had also proposed increased in spectrum charges of 1-3% of AGR depending on the quantum of spectrum usage. Both these events were not notified by the Cabinet and did not materialize into law. If taken together, these would be neutral for the sector.

TDSAT’s ruling on excess allocation of spectrum by DOT – The TDSAT had recently ruled that the GSM operators are not entitled to 2G spectrum grant beyond the 6.2MHz permitted in their UAS (Universal Service Access) license. The ruling does not suggest any actions on operators who have been granted excess spectrum (beyond 6.2 MHz). Potential actions could be a one-time spectrum charge levied on operators holding excess spectrum and /or a recurring excess spectrum levy. We expect the government to step in and take remedial action.