Telecom industry expects to see a significant hike in mobile tariff after next spectrum auction attributed to high spectrum price and lack of availability of spectrum.
“High reserve prices will adversely impact the business viability of the operators. it will lead to increased tariffs, thereby hurting the government’s targets of affordability, rural penetration and Digital India” COAI director Rajan S. Mathews said in a letter to telecom minister. Telecom operators are said to have a total debt of over Rs 2.5 lakhs core.
900 Mhz put for sale in next auction is currently held by Airtel, Idea, Vodafone and Reliance. As per COAI, the government priced 900 Mhz band by almost 32.5% over the price suggested by TRAI. Similarly for 2100 MHz 3G spectrum government price is 107% higher compared to the amount paid by companies for 3G spectrum in 2010.
Spectrum being put for auction is also limited in availability which create artificial scarcity. Only 5MHz of 3G spectrum is put for sale against TRAI recommendation of 20MHz after completing swap deal with defense. In 900 MHz band, only 6.2-14 Mhz is available for auction in each circle. Earlier recommendation, of creating 850MHz EGSM band to increase spectrum availability, was rejected by DOT.
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Telecom operators will spend heavily on renewing their spectrum and buying new 3G spectrum. But the cost will eventually be passed to consumers in the form of tariff hike. We expect the tariff to go up significantly as in most circles 900Mhz spectrum holding by incumbents are up for renewal and they would have to pay the high premium price to win it back.
Please let us know by comments your view on upcoming tariff hike after next spectrum auction?