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Trai recommendations may lead to steep tariff hike in metros: PwC

BS Reporter  |  New Delhi 

The Telecom Regulatory Authority of India (Trai)’s recommendations on spectrum auction, if accepted in its current form, could cause a mobile tariff hike of almost 90 paise per minute in metro cities, according to a report by accounting firm PricewaterhouseCoopers (PwC).

Besides adding to the mobile bill of consumers, the move could also increase the debt burden of Indian telecom operators by Rs 272,000 crore over the next five years, it said.

The report, launched by PwC in a press conference held by the Cellular Operators Association of India (COAI), the telecom operators’ association, found that the impact on cost per minute could be in the range of 24 paise to 28 paise on a national level. The current call charges in metros vary from 50-60 paise per minute.

The telecom regulator in its “Recommendations on Auction of Spectrum”, released on April 23, said the estimated cost per minute could go up by 4.4 paise due to the auction of spectrum.

The PwC report said: “Assuming the spectrum acquisitions as set out by Trai in its recommendations are debt-funded, we estimate that the industry will need to further increase its current debt burden of Rs 185,720 crore by Rs 272,000 crore over the next five years.”

The debt burden of the Indian telecom industry increased significantly since 2009 from Rs 82, 725 crore to Rs 185,720 crore as on March 31.

COAI, whose members include GSM operators such as Vodafone India, Bharti Airtel, has been vehemently opposing the Trai recommendations, which have suggested a reserve price of Rs 3,622 crore for auction of 2G spectrum (1,800 Mhz), much higher than the Rs 1,657 crore operators paid at the time of the previous allocation.

The association has been mounting pressure on the government against the recommendations, raising the bogey of tariff hike.

According Rajat Mukarji, chief operating officer of Idea Cellular Ltd: “While Indian operators have absorbed cost increases in the past, including after the 3G auctions of 2010, due to erosion of margins in the past few years we do not believe the industry has the capability to do so further.”

Indian operators’ average Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins, an indication of profitability, are now the lowest in emerging Asian countries, standing at 28.9 per cent against a regional average of 40 per cent.

According to the report, Trai underestimates the cost per minute impact by around 50 per cent by counting both incoming and outgoing MOU (minutes of usage) in its calculations rather than outgoing MOU alone which are charged.

PwC also pointed out that the assumptions made by Trai in its recommendations were also flawed. In its estimate, MOU per subscriber is assumed by Trai to grow by 83 per cent in the 20-year period, while in the last four years’ MOU per subscriber has declined by 13 per cent per annum.

India is unlikely to see data usage as 50 per cent of revenue by 2020-21 as estimated by Trai, and would require a significant increase in spectrum to carry the additional traffic.

Moreover, Trai has not considered the further cost of extension of licences for renewed usage of spectrum, which are at present in use for servicing current customer needs, the report said.

Idea also cuts 3G rates

Idea Cellular on Tuesday followed the footsteps of Bharti Airtel by cutting its 3G rates by 70 per cent. The rates are applicable to both prepaid and post-paid customers. The company will now charge 3p/10 KB of data, from an earlier rate of 10p/10KB. Airtel had cut its 3G rates by 70 per cent, four days back.

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First Published: Wed, May 23 2012. 01:02 IST