Telecom tariff hike seems unavoidable: experts

After the Supreme Court's cancelling 122 new telecom licences, India may see the end of low tariff regime that made call rates in the country among the lowest in the world, say experts.

The apex court's move will provide opportunity to the old players to improve margins by hiking rates as the competition reduces in the sector.

"With the number of operators likely to reduce, incumbent operators will be in a better position to hike tariffs," Crisil Research said in a statement today.

The new entrants, who replace the holders of licences that have been cancelled yesterday by the court in the 2G spectrum allocation scam case, will have to get radio waves through auctions that will push up their costs and lead to high tariffs.

"Operators who acquire licences under the new process are likely to raise tariffs to cover the higher licence fees. Consequently, telecom tariffs will increase significantly, resulting in improved profitability for the current operators," Crisil said.

Gartner sees cancellation of licences as opportunity for incumbent players to recover investment they have made in 3G spectrum and other infrastructure.

"On normal course, we expect tariff to go up by 20%. Given the pressure on margins of some of incumbent players, there can be increase in telecom tariffs by them to recover investment they have made in 3G and BWA airwaves auction," Research Director at Gartner Kamlesh Bhatia said.

Telecom tariffs will move towards rationalisation, which will be reflective of actual costs and not artificial pricing driven by intense competition.

New Telecom operator Uninor, which offers calls at as low as 2 paisa per minute and whose license will be impacted by the Supreme Court judgement, said that customers in Delhi are paying 60% higher traiffs than those in Mumbai for the same services.

"Perhaps it is no coincidence that the last operator in Delhi came three years ago and none of the new GSM operators are present in this market," Uninor spokesperson said.

Licences of another low tariff provider Sistema Shyam Teleservices is also cancelled, which provides half-paisa per second under the special scheme.