Telecom CEOs warn tariffs may double

Telecom CEOs who met Telecom Minister Kapil Sibal warned him about impact of Trai's actions.

Written by Agencies | New Delhi | Published: May 8, 2012 5:03:05 pm

Mobile call rates would double in some circles if the recommendations of sectoral regulator Trai on spectrum pricing are accepted,telecom CEOs who met Telecom Minister Kapil Sibal warned today.

“…there will be circles which will have more than a 100 per cent price rise (in tariffs) if they were to absorb the impact of what is being recommended,” Bharti Airtel CEO Sanjay Kapoor told reporters here.

“In one circle,the cost of spectrum,the reserve price is Rs 7 crore and on other end,there are metros where it is Rs 717 crore,which is a 100 times differential,” he said.

The chiefs of Bharti Airtel,Vodafone India,Idea Cellular,Uninor and Videocon met Sibal and Department of Telecom Secretary R Chandrashekhar to discuss the implications of Trai recommendations.

Top officials of CDMA operators Sistema Shyam Teleservices,Reliance Communications,Tata Teleservices and CDMA body AUSPI also met the minister earlier in the day on the same issue.

Kapoor said,”The discussion was about 2 things — one is the Trai recommendations made on the reserve price and auction,and basically (its saying) that the recommendations will have an impact of 2 paise on the industry,and the other was about refarming.”

Trai has not considered the price elasticity of demand while formulating the 2 paise assumption,he said.

“As the prices rise,the consumption goes down. And it has been absolutely assumed as if the consumption will remain constant which is not correct,” Kapoor said,adding that there is a 30 paise per minute impact and not 2 paise as Trai has assumed.

The Telecom Regulatory Authority of India (Trai) has suggested a base price of Rs 3,622 crore for one megahertz (MHz) for pan-India spectrum.

This is around 10 times higher for pan-India operations than the price at which 2G licences bundled with 4.4 MHz spectrum were allocated in 2008 under the then telecom minister A Raja.

Kapoor said Trai has taken into consideration only 576 Mhz in the 1800 Mhz band for calculations,whereas in reality 1167.40 Mhz of spectrum is at play.

“Now the difference between what Trai has taken is three times apart because Trai has taken Rs 93,000 crore into cognisance whereas the cost of spectrum that I just mentioned is more than Rs 2,84,000 crore,” he added.

Alleging that an artificial scarcity is being created,Kapoor said,”Only 20 per cent is being auctioned in the market which clearly tells you that an artificial scarcity is being created and therefore the prices will be taken up unrealistically.”

On Trai recommendation on re-farming the spectrum,under which operators will be migrated to a higher frequency band,Kapoor said the industry will have to invest Rs 1,25,000 crore of capex and Rs 25,000 crore of operating cost additionally to just protect the existing revenues.

“This will also include write-offs of Rs 25,000 crore worth of assets which will not be used by the industry because 900 (Mhz) will not exist,” he added.

Trai has proposed roadmap for spectrum re-farming under which existing player will be made to use 1800 Mhz band,compared to the lower frequency band of 900 Mhz.

Telecom signals emitted using 900 Mhz frequency band cover large area and is therefore cost-efficient,compared to 1800 Mhz band.

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