Cellular tariffs may fall further

Cellcos may pass on benefit of reduced licence fees to subscribers

A further cut in cellular phone tariff can be expected with all major players, including Bharti Televentures and Hutchison-Essar, planning to pass on the benefit of the cut in licence fee to their subscribers.

Rajan Mittal of Bharti said that the cellular players were likely to look at the pricing issue now. Bharti itself would be able to offer its subscribers true value, he said, not ruling out a further cut in tariffs.

Senior executives in Hutchison Essar that the telecom sector was capital intensive and required huge funds. Allowing foreign institutional investor (FII) 25 per cent over the 49 per cent foreign direct investment (FDI) cap would give existing players the much-needed headroom for induction of funds, they said.

The Cellular Operators Association of India (COAI) welcomed the package announced by the government as a step-forward and it hoped that the Centre would address the residual concerns of the sector as well.

The other issues which called for immediate attention included direct inter-circle connectivity, higher spectrum allocation and optimal pricing.

COAI Chairman Dilip Modi said that one player had voted against the resolution to cooperate with the government on judicial matters. Sources in the industry said, Aircel Ltd, offering services in Tamil Nadu, had voted against the resolution.

"The government has acknowledged the problems faced by the first and second licencees in the circles and has announced a much sought after relief. We hope that the environment of mutual respect so created would trigger other steps to propel the industry on the high-growth trajectory," Modi said.

The industry has expressed hope that it would be better able to access capital and manage its liabilities, following the government's assurance that the finance ministry would ask the financial institutions to re-work the debt schedule of the telecom companies in the red.

The industry has invested Rs 25,000 crore to develop the cellular infrastructure, of which the debt component is approximately Rs 14,000 crore.

COAI has said that it would withdraw all litigations in the Supreme Court against wireless in local loop (mobility) and unified license regime and if there was attempt to revive the case by a single operator, the association would support the government.

Modi said that today's announcement would help to end the three-year old dispute between the cellular and basic operators and would help the industry as a whole to focus on development rather than litigation.