The Empowered Group of Ministers (EGoM) constituted by the government to deliberate on the issue of on third generation (3G) spectrum auction has decided the minimum price for the for pan-India 3G license at Rs 3,500 crore. The panel also decided to allow only four operators [plus BSNL / MTNL backdoor entry]to offer the high-speed mobile services in the first phase.

What it means is that only four new players will be given spectrum in each circle as one slot is already pre-empted by the BSNL/MTNL. The government expects that the auction would yield revenue of Rs 25,000 crore. Telecom minister A Raja, who was also present at the meeting, said that the government would complete the auction of 3G spectrum within three months and expected to raise Rs 25,000 crore.

The panel, headed by finance minister Pranab Mukherjee, was constituted after the Department of Telecommunications (DoT) and finance ministry failed reach a common price for auction of the scarce resource. The EGoM will have three options available before it, Rs 1,010 crore suggested by the telecom regulator TRAI, Rs 2,020 crore advocated by the DoT and Rs 4,040 crore proposed by the finance ministry itself. While the DoT wanted lower price to ensure rapid spread of 3G services, the finance ministry wanted higher price to ensure maximum revenue. The final price decided by the panel seems to be a compromise between the two positions.

The EGoM has also fixed the reserve price of Rs 1,750 crore for the WiMax services. The reason for allowing only five players is probably that government wants to ensure that total supply of spectrum remains somewhat lower than demand. Since only 6-7 serious players are likely to bid, the government has decided to restrict players to five to ensure that it gets maximum prices per unit of spectrum.