Operators may pass burden of spectrum costs on customers

Forthcoming spectrum auctions may impact your mobile tariffs as operators hint at sharing the burden of spectrum costs with customers.

By Kul Bhushan Published Date
27 - Oct - 2014
| Last Updated
27 - Oct - 2014
Operators may pass burden of spectrum costs on customers

Telecom operators may increase tariff rates in the near future as they grapple with inflated costs of acquiring spectrum in the auctions slated to be held in February 2015. According to COAI director general Rajan S Mathews, the telecom operators will be compelled to pass on the burden of expensive spectrum prices on customers.

"The upcoming spectrum auctions for 900 MHz and 1800 MHz airwaves is expected to push up the debt burden on Indian telcos to about INR 3,00,000 crore under the current conditions, i.e. at the present reserve prices as suggested by TRAI. It is pertinent to note that the Indian telecom sector is already laden with debt of around INR 2,50,000 crore. This growing debt load will place increasing margin pressures on operators due to higher interest expenses," says Rajan S Mathews Director General, COAI.
"Due to the reluctance of banks to loan out the amount to telcos owing to their high debt burden, it is likely that the costs will have to be transferred to the consumers to offset the infrastructure and network operation costs. Hence, the additional costs may have to be passed on to consumers through higher tariffs. Alternatively, the government can reduce licence fee and spectrum usage charges significantly to neutralize the burden on the telecom operators."

It may be recalled the telecom regulatory authority body TRAI had sought 10 percent higher base price for the February auctions in the 1800 MHz band. It suggested base price of Rs. 2138 crore per MHz in  1800 MHz and Rs. 3004 crore in 900 MHz band.

The telecom operators have been making all out efforts to increase margins. The operators are already facing competition from the OTT players and declining revenues from services from voice and VAS. Moreover, they have increased tariffs, cut on freebies and discounts.

Also read: Analysis: How can mobile VAS segment hit the revival path and Should OTT players like WhatsApp and Skype pay fee to telcos? TRAI begins discussions

Source: Livemint