National 3G license in India to cost over $US2.5 billion

The government had set a floor price of about a quarter of this amount

Bidders for 3G spectrum and licenses in India have pushed up the cost of a nationwide license on Thursday to more than 113 billion Indian rupees (US$2.52 billion), further raising doubts about how quickly operators will be able to make money out of the service.

The base price for a national license across 22 service areas of the country had been earlier set at 35 billion Indian rupees.

The auction began on April 9, and is expected to conclude in a few days.

The Department of Telecommunications (DOT) said on Thursday that 132 rounds of bidding had been completed after 23 days of the auction. The highest bids at around 19 billion rupees each were for Delhi and Mumbai. The bids for these two service areas were on Thursday six times the base price.

The success of the 3G auctions in raising revenue for the Indian government has raised questions about a 2007 decision by the government to award 2G licenses in the country on a "first-come, first-served" basis, rather than by an auction. The Telecom Regulatory Authority of India (TRAI) had recommended an auction.

Opposition members in Parliament are demanding the resignation of communications minister A. Raja, since last week, alleging corruption and favoritism in the award of the 2G licenses. Some DOT officials and private companies are already under investigation by India's Central Bureau of Investigation since October last year for alleged irregularities in the award of these licenses.

The 2G licenses were awarded at very low prices that were current in 2001, CBI said last year. Some successful bidders later sold stakes in their companies to foreign telecom operators at higher prices, opposition politicians said last week.

There are nine bidders for the 3G licenses in the current auction, which is to be followed by an auction of spectrum for broadband wireless access.

All nine bidders are currently service providers in the country, and need spectrum to expand their subscriber base. They will most probably move some of their customer base to 3G, Kamlesh Bhatia, a principal research analyst at Gartner, said recently in an interview. They will need deep pockets and staying power, as the Indian 3G market will take some time to take off, he added.

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