Bidding for long-awaited 3G spectrum bandwidth in India began this morning amid reports that participants may need to spend heavily to achieve nationwide coverage. The Financial Times, citing figures from Macquarie Securities, claims that national allocations of 3G and the accompanying Broadband Wireless Access (BWA) spectrum could together cost operators up to US$3 billion each. The country’s main mobile players – Bharti, Reliance, Vodafone and Idea Cellular – are registered to participate in both auctions and are expected to lead bidding. “We have already put in our first bids,” a source at one of India’s top operators told the Financial Times today. The Indian government has set a reserve price of INR35 billion (US$789 million) for a national 3G allocation and INR17.5 billion for the BWA equivalent, and is aiming to raise INR350 billion from the auction in its budget for the year ending March 2011.

As well as the ability to rollout new data services, the new spectrum will also provide extra capacity for operators struggling to meet demand in the world’s fastest-growing mobile market, which is currently adding around 20 million new subscribers a month. Bidding for 3G spectrum is expected to be intense as there are only three spectrum slots available in most of the country’s 22 telecom service areas, and these allocations – 5MHz per operator – are deemed small by international standards. “It’s one third to one fourth of what was allocated in Europe,” said Kunal Bajaj, managing director at telecoms consulting firm BDA Connect. “In Europe, the minimum allocation size was 15MHz.” According to India’s Department of Telecom’s official auction guidelines – published this week – all bidding details will be kept secret until the end, both from public and from other bidders, a strategy it says is aimed at “frustrating coordinated outcomes.” Nine applicants for 3G spectrum and 11 applicants for BWA spectrum have been approved to take part in the auctions. The full list of bidders can be viewed here.