India is set to raise more than Rs242bn from the auction of spectrum for third-generation mobile telephony as early as August or September if plans by the telecoms department are approved.

The long-delayed auction will throw open data services in the world's fastest growing large mobile market and speed up the spread of broadband in a country with woefully low levels of internet penetration.

People familiar with the matter said the department of telecoms was planning to auction six nationwide 3G licences to private sector operators for about Rs40.4bn ($842m) each, earning at least Rs242.4bn for the national treasury.

Domestic private and foreign operators that are likely to bid for the 3G auctions include India's biggest provider by subscribers, Bharti Airtel, second-ranked Reliance Communications, third-ranked Vodafone Essar and smaller operators such as Unitech, which is partly owned by Norway's Telenor, and Tata Teleservices, partly owned by Japan's NTT DoCoMo.

The bidding price for the spectrum is double that earlier mooted by the telecoms ministry, prompting speculation the price might be too expensive given the global economic downturn.

But with India continuing to attract foreign investment into the sector, including some last year by DoCoMo and Telenor, there are expectations the 3G auctions will be hotly contested.

"We must not underestimate the depth of the market. I am bullish that we would be able to get more than the price set by the government," Sachin Pilot, junior minister for information technology, told the Financial Times.

India has been planning to auction spectrum for third-generation mobile telephony for years but the process has been delayed by bureaucracy and disagreements over what price operators should pay.

Although limited 3G services are available from state-owned operators and data card providers, India is the only large market that has yet to fully launch the technology. China launched 3G in January.

The proposals now have to go before the cabinet committee on economic affairs in the next week or two. If cabinet approves, it will take about 60 days for the auction to be held.

The government is exp-ected to auction additional spectrum for WiMax networks shortly after the 3G auction at a reserve price of Rs20.2bn per network.

The new government has been expected to speed up the launch of 3G to help raise money to fund its growing fiscal deficit.

Mr Pilot said the government aimed to raise the share of the populace with some type of phone service to 40 per cent, from 13 per cent, within five years. "In three years' time, we will expand broadband coverage to connect every village panchayat [government] to a broadband network," he said.

Source:FT.com