Industry Body says High Spectrum Costs Will Lead to Increased Mobile Tariffs

The Indian government will hold the auction of mobile spectrum in the month of February. The Indian Exchequer is expected to gain Rs. 80,000 crore(Rs 64,840 crore excluding 2100 MHz spectrum) from this auction. The bidding process is expected to start on February 23. But the industry association of GSM operators in India, COAI(Cellular Operators Association of India) are warning that the high spectrum costs would lead to higher mobile tariff for the consumers.

COAI has written a letter to the Minister of Telecom, Mr. Ravi Shanker Prasad saying that the high prices would adversely impact the business viability for the telecom operators. They also added that the high spectrum costs would lead to tariff hike and will also effect government’s Digital India initiative and hinder rural penetration. The letter is also said to be forwarded to the Prime Minister.

COAI claims that the high spectrum costs will lead to increased mobile tariff’s which will hamper government’s Digital India plan.

The cabinet of ministers approved the following reserve pricing for the various spectrums:

• Rs. 3,646 crores for pan-India license per MHz in the 800 MHz band
• Rs. 3,980 crores for pan-India excluding Delhi, Mumbai, Kolkata, and J&K in the 900 MHz band
• Rs. 2,191 crores pan-India (excluding Maharashtra and West Bengal) in the 1800 MHz band.

COAI has also said that the government has priced the spectrum way above the pricing recommended by telecom regulator TRAI (Telecom Regulatory Authority of India). The pricing is said to be over 107% higher than the amount paid by the companies in the spectrum auction of 2010. TARI has also recommended a reduction of the license fee from 8% of adjusted gross revenue to 6%.

The government plans to bring 5 Mhz for auction and will release an additional 15 Mhz on a later date. This low availability of spectrum will lead to even higher final prices as the companies would have to try to ferociously outbid each other to stay in business. The last auction also lead to heavy price wars which lead to the telecom companies borrowing huge amount of money from the banks. COAI claims that the combined debt of the industry now stands at a staggering Rs. 2.5 lakh crores.

The present Indian government has some audacious plans to raise the standards of connectivity across India. For this a healthy cooperation with the telecom companies is essential. The issues raised by the telecom body seem valid, and the price is ultimately going to be borne by the consumers. We will await the government’s response for more updates on the story. Keep checking back on iGyaan.in.