Telcos may raise tariffs to pay for spectrum costs

They are expected to pass on to customers the burden of spectrum cost they will incur in the upcoming auction in February 2015

Industry body COAI has said mobile tariffs may go up soon as telecom operators are expected to pass on to customers the burden of spectrum cost they will incur in the upcoming auction.

The auction of airwaves is likely to be conducted in February next year.

"Definitely there will be an upward pressure on tariffs as the debt burden of telecom players will increase post auctions, they have to pass on the cost to customers," COAI Director General Rajan S Mathews told PTI.

He said operators have to pay around Rs 40,000 crore for the spectrum even if the airwaves would be sold at reserve price in 900MHz and 1800 MHz bands.

"From where the money will come from? Banks are also unwilling to lend to telecom operators due to high debt burden. Also the telcos have to spend on network infrastructure. So, after paying such huge amount for spectrum only, they have to pass the burden to customers," Mathews said.

Telecom sector regulator TRAI had suggested a 10 per cent higher base price for the next round of spectrum auction in the 1800 Mhz band.

The Telecom Regulatory Authority of India (TRAI) had recommended a price of Rs 2,138 crore per Mhz for the 1800 Mhz band and Rs 3,004 crore per Mhz for the premium 900 Mhz band.

The spectrum auction will be conducted for radiowaves in 900 Mhz held by existing telecom operators Airtel, Vodafone, Idea Cellular and Reliance Communications through their licences that are expiring in 2015-16.

In the 900 Mhz band, about 184 Mhz of spectrum is likely to be auctioned. In 1800 Mhz, government has proposed to auction 104 Mhz of spectrum which included spectrum held by licences that are expiring in 2015-16 and unsold airwaves in February auction.

Telecom operators have been cutting back on freebies and discounted minutes to maintain profitability. Analysts say this trend may continue as they have to pay for the fresh spectrum purchases.

After the last auction held in February this year, Vodafone India CEO Marten Pieters had said the telecom industry in India has reached a point where the tariffs need to increase every year to sustain itself.

The February 2014 auctions fetched about Rs 62,162 crore.