This certainly isn't good news for those who love spending long hours talking away on their cellphones. Mobile call rates are to jump by 30 paise per minute. The telecom industry says the move to hike tarrifs is imminent, as a result of a rather disappointing decision by the Cabinet to keep the base price of the spectrum fixed at Rs.14,000 crore. The decision, says the telecom industry, will prove to be “regressive” for the sector's growth and that it would force operators to hike tariffs. Reports further quoted the Cellular Operators Association of India (COAI), “It will continue to have an impact on the tariffs to the extent of about 30 paisa per minute. The effect on finances is that an amount of Rs 3,20,000 crore of additional debt that will have to be laid on the industry.”
Making calls to get costlier (Image credit: Getty Images)
Elaborating on the background of the issue, the report adds that the Cabinet, with Prime Minister Manmohan Singh at the helm took the decision to fix the reserve price at Rs 14,000 crore for 5 MHz of airwaves. TRAI had recommended around Rs 18,000 crore for the spectrum auction.
Association of Unified Telecom Service Providers of India (AUSPI), the body of CDMA operators was quoted as saying, “It (reserve price) is still very high. It will definitely affect the tariffs.”
In May, we had reported of telecom companies warning that a tariff hike would be imminent if the government accepted TRAI’s recommendations. A similar projection by PricewaterhouseCoopers (PwC) also came up in May this year, when the consultancy firm revealed that if the government did accept TRAI’s recommendations on the spectrum pricing, mobile tariffs would go up by 90 paise in the metros.
Another mention in the PwC report was quite alarming. It stated that the industry is under a lot of debt and the recommended price will make it difficult to obtain a bank loan. “Assuming the spectrum acquisitions as set out by TRAI in its recommendation are debt funded, we estimate that the industry will need to further increase its current debt burden of Rs 185,720 crore by approximately Rs 272,000 crore over next five years,” the Executive Director of PwC India, Mohammad Chowdhury was quoted in one of our previous reports.
Early this year, the Supreme Court had revoked 122 telecom licenses. The decision plunged the mobile network market of Asia's third-largest economy into uncertainty. The ruling was a setback for Manmohan Singh's government, which oversaw the sale of the licenses at below-market prices, costing the exchequer up to $36 billion in lost revenues. The licences affected included all of those held by Unitech Wireless, the Indian joint venture of Norway's Telenor and Unitech.