India is a powerhouse in software, but has failed to achieve the same progress in the wireless world, partly because of a closed approach to foreign ownership. But the country is determined to accelerate its progress towards mobile broadband, and it may start relaxing some of its rules. For instance, in the upcoming re-auction of cancelled 2G spectrum licences, foreign firms will be allowed to bid without a local partner.
The government hopes to boost participation in the sale ‘ and prices – by removing the usual requirement to have an Indian joint venture partner in order to bid for spectrum in the country.
Current rules restrict external companies from owning more than 74% of an Indian telco, leading to partnerships such as Vodafone with Essar and Telenor with Unitech, which are often complex and even fraught. A telecom department official told Economic Times that the authorities will not insist on enforcing this 74% rule in advance of the bidding, though any winner would still have to find a local partner before launching commercial services and will likely get a 90-day period to do so.
The concession would help new entrants from abroad to take part in the auction without going through the process of finding a JV partner, a burden which would be wasted if no licences were won. It will also be a boost to Telenor, which is in dispute with Unitech and wants to sell off the Uninor venture, starting afresh with another local firm. The auction rujles would mean it did not have to finalize this issue before the auction.
The licences, originally issued in a now discredited 2008 auction, were cancelled in February by the Indian Supreme Court. The telecoms ministry is seeking a four-month extension of the Court’s deadline to auction the spectrum again by August 31.
In other areas of the wireless industry, India remains inwardly focused, particularly with new proposed rules that will make operators buy an increasingly large proportion of their kit from local suppliers. Indian telcos will be required to purchase a range of products from local suppliers and will be restricted from importing them from next April under new proposals, which is classing the products as ‘subject to security concerns’ which enables the government to get round World Trade Organization rules on free trade. But the items include SIM cards. Under the new rules, nearly one-third of products on the soon-to-be finalized list will need to come from local suppliers, and items that are imported will need to have up to 25% of their value added by local firms.
Some of these quotas apply to Indian-based vendors, despite the country’s shortage of top rank wireless manufacturers, but cellcos can also fulfil some of the requirements by buying kit from foreign firms which is produced in India.
This is creating a rush of suppliers to increase their investment in Indian plants and partnerships. Huawei has announced that it will start to produce smartphones in Chennai, India, where it has already started manufacturing infrastructure as it seeks to counter the hostility of Indian security agencies by pledging high levels of spending in the country.
Local media said Huawei was “currently conducting quality evaluations and sorting out supply chain issues”. The firm presently makes its own handsets entirely in China and also oursources some production to Foxconn.
The Chinese vendor currently has 2,500 sales outlets in 35 Indian cities, and plans to expand these numbers to 20,000 and 200 cities.
The India regulator is also finalizing plans to reclaim 900MHz GSM spectrum from the incumbents and resell it next year. Under a controversial plan, 2G carriers will receive 1.8GHz frequencies in return, with the 900MHz licences to be sold in mid-2013.