UPDATE 1-India to hold global auction for 3G spectrum

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By Devidutta Tripathy and C.J. Kuncheria

NEW DELHI, Aug 1 (Reuters) - India will hold a global auction of third-generation (3G) licences this year, offering foreign firms the chance to tap the world's fastest-growing wireless market and raising up to $9.5 billion for the government.

Five licences would be offered initially and possibly 10 in total, telecoms minister Andimuthu Raja said on Friday, for the next-generation services which give users fast Internet access, games and a host of multimedia content on their cellphones.

Current Indian licencees, such as Bharti Airtel (BRTI.BO) and Reliance Communications (RLCM.BO), and foreign firms like Vodafone (VOD.L) with prior experience in 3G services could compete in the auctions for the 60 Mhz of available spectrum, which Raja expected to be completed by December.

The auctions could open up opportunities for international operators such as AT&T (T.N) who have not yet got telecoms licences in the world's second-largest wireless market.

It will also spell opportunities for network gear makers such as Nokia Siemens [NSN.UL], Ericsson (ERICb.ST), Motorola (MOT.N), Huawei [HWT.UL], as successful bidders could spend billion of dollars building 3G networks.

One slot each in India's 22 telecom zones would be reserved for state-run firms Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) (MTNL.BO).

Shares in telecoms firms rose on the news, with top mobile operator Bharti Airtel (BRTI.BO) gaining as much as 3.1 percent and MTNL rising as much as 7.6 percent.

E-AUCTION

The government has set a minimum reserve price of 20.20 billion rupees ($480 million) for licences covering all of India, but bids are expected at much higher levels. Raja said he sees revenues of 300 billion to 400 billion rupees.

"Sensible bidding should be the case, but who knows," said Bharti Airtel Chairman Sunil Mittal.

The government will also auction spectrum for broadband wireless access services, and the reserve price has been set at 25 percent of the 3G reserve price.

India will introduce number portability in the middle of next year, allowing users to keep their numbers even if they change operators. Bids for licences to implement the system will be sought in two months from experienced companies, Raja said.

India is the world's second-largest wireless market after China with about 290 million mobile subscribers. Rock-bottom call rates and availability of cheaper handsets are driving subscriber additions of more than 8 million every month.

The country had first opened up mobile telephony to private operators in the mid-90s, but subscriber growth gathered momentum in the current decade, rising about 25 times between 2002 and 2007. ($1=42.3 rupees) (Editing by John Mair & Mark Williams)