Five leading telecom operators have written to communications and information technology minister Kapil Sibal, saying the high cost of spectrum as recommended by the Telecom Regulatory Authority of India (Trai) is expected to raise mobile call rates by 25-30 per cent.
“The high cost of spectrum will translate into a much higher tariff for consumers. It is estimated that tariffs will go up by at least 25-30 per cent,” stated a joint letter by chief executive officers of Bharti Airtel, Vodafone, Idea Cellular, Uninor and Videocon. Call rates in India are among the lowest in the world.
Trai on Monday recommended a reserve price of Rs 3,622 crore per megahertz (MHz) in the 1,800-MHz band (for GSM services). The reserve price is close to 10 times higher than what operators had paid in 2008 for acquiring the licence at Rs 1,658 crore, which came bundled with 4.4 MHz of 2G spectrum.
Trai’s proposals came after the Supreme Court in February ordered the cancellation of 122 licences issued in January 2008. The apex court also extended the validity of the licences to September 7, from June 2, besides asking the government to conduct spectrum auction by August 31.
The main impacted companies include Uninor, Videocon and Sistema Shyam.
The letter by the GSM operators said the regulator had failed to appreciate that such high prices were completely unsustainable in a highly price-sensitive market such as India, which had an average revenue per user of less than Rs 90, poor teledensity and required huge investments to roll out networks in rural and remote areas.
The high auction price, if at all paid, would not leave any resource in the hands of operators to do the required network rollouts. “In fact, it is likely to push back the industry by several years, thus compromising both the connectivity as well as the broadband agenda of the country.”
The companies said the government should reduce the prices proposed by the regulator by 80 per cent and allow the market to discover the true spectrum price.
“Trai-recommended rollout obligations are extremely onerous and unwarranted. Having paid the market or auction price for spectrum, there is no justification for mandating any rollout obligation. The recommendations on so called ‘refarming’ have no nexus with the Supreme Court judgment,” the letter said.
The telecom regulator recommended that 900 MHz spectrum should be refarmed and existing operators should be migrated to the 1,800-MHz band. Bharti, Vodafone and Idea are the main users of the 900-MHz spectrum band. “On an average, 66.8 per cent of the total mobile customers in the country are being served using the network on 900 and 800 MHz network,” the letter added.
It also said that the growth story, which had been quite compelling till recently, now indicates significant reversal in key financial and operating parameters and a strong decline in investor confidence. The recent downgrading on India’s rating by Standard and Poor is yet another indication of the poor investor sentiment that is troubling the market.
So, such circumstances call for swift and bold policy initiatives from the Government to restore investor confidence, business sustainability and public interest.
“It is most unfortunate that the TRAI has come out with a highly retrograde set of proposals on spectrum auctions that militate against National Telecom Policies, both the existing and the proposed, and directly harms the Consumers and rural connectivity.”
Also, auctioning only 5Mhz of spectrin each circle and holding back about 80 per cent of the available spectrum will result in a totally unrealistic and inflated market value caused through creation of artificial scarcity.
The companies also demanded a level playing field versus dual technology spectrum holders.