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India's billion-dollar 3G cellular auction opens

NEW DELHI -- India's mobile phone firms began bidding Friday to provide superfast third-generation (3G) services in the booming cellular market — a sale expected to reap for the government billions of dollars.

Leading Indian operators Bharti Airtel, Reliance and foreign-backed Vodafone Essar and Tata DoCoMo are among the companies taking part in the auction that could take weeks, according to government officials.

New Delhi is hoping to bring in at least eight billion dollars from the long-delayed sell-off of 3G airwaves and a follow-up auction of broadband wireless access spectrum in what will be the largest such sale in recent years.

“The major operators will bid aggressively. It will be very important for them to win 3G slots to retain their high-end subscribers,” Kunal Bajaj, managing director at telecoms consulting firm BDA Connect, told AFP.

The starting price has been set at 780 million dollars for pan-India 3G licenses.

But analysts expect the bidding to go much higher because of the scramble for spectrum — the radio-based waves that carry mobile traffic — in a congested market which has over a dozen players.

“The bids should be double (the base price),” forecast Romal Shetty, executive director for telecommunications at KPMG's Indian unit. Some say the offers could be triple the floor price. 3G allows mobile phone users to surf the Internet, video conference and download music, video and other content at a much faster pace than the current second-generation or 2G service.

The addition of 3G is seen as giving a major boost to a mobile market already growing by up to 20 million subscribers a month. Mobile subscribers totaled 563.73 million at the last count.

JPMorgan said in a report the bidding could “stretch balance sheets” of mobile companies that have already been undermined by fierce tariff battles, which have reduced calling costs to less than a cent a minute.

India, a country of 1.2 billion people, is playing catch-up as it is the biggest major economy not to have widespread 3G services.

Fellow emerging market giant China started offering 3G services last year.

Even if India's government gets eight billion dollars for the airwaves, the sum will come nowhere near the 19 billion raised by the U.S. government two years ago and the 35 billion earned by Britain in 2000.

But for at least the first year, the main focus for phone companies is expected to be on improving call quality. 3G uptake in India is expected to be slow in the initial stages as 3G handsets are more expensive than second generation handsets.

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