Analysis: Mobile tariff unlikely to go up after auction

indiaTelecom Spectrum auction is a great success for the Government, it garners around Rs.1.10 Lakh Crore from the sale of mobile phone airwaves after 19 days of fierce bidding. The amount is more than Rs.1.06 Lakh Crore raised during the year 2010. The Finance Minister may happy that one-third of the amount will come to Governments kitty within 15 days and it is very useful for him to reduce the Fiscal Deficit of the country. Incumbents Airtel, Idea, RCOM, and Vodafone had bid aggressively to protect their businesses as their license expires by 2015-16.

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Subscribers fear that tariff may go up in the near future as the incumbent operators may try to pass on the burden of the high cost of spectrum to their subscribers. However, this may not be possible for the operators easily for the following three important reasons.

First, only four operators have bought the spectrum at higher price to renew their licenses in some of the circles in which they provide services, but in every circle there are six to eight operators providing services. There is a very fierce competition among all these operators to win over the subscribers and everyone try to owe the subscribers by the one way or the other. In order to recover the higher spectrum cost if these operators try to increase their tariff, others also must respond to it, otherwise the increase cannot be sustain for a long. By using this opportunity, the other operators may try grab new subscribers as much as possible without increasing their tariff in order to utilize their spare capacity.