The Telecom Regulatory Authority of India (TRAI) is planning to set the reserve price for the 2G auctions at close to Rs. 3,780 crore which is 1.08 times the 3G reserve price. According to reports, if this is indeed happening, it may well indicate that the consumers will eventually have to bear the brunt. A leading 2G operator mentioned that owing to this, telecom companies will have absolutely no choice but to increase the rates for their subscibers. The source went on to say that, “Take the case of players like Telenor or Sistema, who bagged 2G licenses by paying only Rs 1,650 crore license. If they were to bid again for spectrum which costs over twice the price they paid earlier, they may have to hike charges to stay viable. For existing telcos, too, this could spell trouble since this will become the benchmark price for license renewal going forward. Price hikes could become the order of the day”.
Consumers may have to bear the brunt
Commenting on the topic, Hemant Joshi, Partner of Deloitte Haskins & Sells stated that, “The Indian telecom sector is reeling under hyper competition due to overcapacity and under cash strain due to high prices paid for 3G spectrum and capital intensive nature of the industry. The new guidelines on spectrum, if accepted by Government in totality, then the business models by the incumbents and new operators would have to be redrawn as operators would have to pay significantly higher price for the spectrum which may ultimately lead to upward revision in tariffs.“ There has been a significant redux in the number of operators due to the license cancellations by the Supreme Court in February and now due to these reforms, potential new entrants like AT&T may refrain from entering the market.
An official Vodafone India media holding statement mentioned that, “Vodafone India is deeply concerned to read the TRAI recommendations. We believe that several of these recommendations are retrograde and if accepted, will do irreparable harm to the industry. It will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring improved rural tele-density and right to broadband. We will share our detailed observations in due course.”
The animosity is soon coming into the picture with clear disdain on the current reforms made by TRAI. Stay tuned to this space for more updates.
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