Spectrum Auction: Rise in mobile tariffs imminent

NEW DELHI: Mobile tariffs are likely to see a rise as telcos have to struggle to improve their balance sheets after forking out huge amount of monies for the spectrum auction.

The government has raked in Rs 1.09 lakh crore by auctioning spectrum in 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands and the auctions, which closed on Wednesday, is dubbed to be the biggest ever spectrum auction.

Industry experts believe that with telcos reeling under pressure owing to huge debts and low ARPUs, they will look out for options to improve their balance sheets. Sumit D Chowdhury, former Reliance Jio President, said: “Telcos would be left out with no options but to pass on the burder to the consumers.”

“The auction was designed to extract maximum from telecom operators else why would someone create scarcity of spectrum. Financial and cost structure of industry has been completely altered. Consequently tariff will have to be increased to meet commitment to government,” industry body COAI Director General Rajan S Mathews said.

This auction will increase the debt burden on telecom operators from about Rs 2.6 lakh crore at present to around Rs 3.4 lakh crore.

Industry experts are also of the view that the sector would have benefitted had the government provided clarity on M&A and spectrum trading / sharing guidelines before auction. Last year, Bharti Airtel called off its acquisition of Loop Mobile, citing regulatory delays.

Arpita Pal Agrawal, Telecom Leader at PwC India, “As the spectrum is being acquired for twenty years, it will be very valuable with increase in data maturity in the market; however in short to mid-term it will impact the financials of telecom players negatively.”

She also added that small hikes in telecom tariffs cannot be ruled out once scale economy and competitive forces are factored in.

ASSOCHAM Telecom Council Chairman TV Ramachandran said, “Consumer tariffs are bound to rise significantly but, due to the level of hyper-competition present here, the increase would not be anywhere near adequate to cover the higher cost. Inevitably, the severely cash-strapped companies will be unable to expand or roll out as required to connect the unconnected. Result: the Aam Aadmi, desperately seeking increased connectivity for his personal productivity and quality of life enhancements, would probably remain underserved longer.”

He also said that “nearly 90% of the spectrum put for auction was sold at a staggering figure of Rs.1.1 lakh crores. While this is no doubt beneficial for addressing the fiscal deficit, the outcome does raise some important concerns not only for the industry but also, more importantly the consumer – the ‘Aam Aadmi’, and for the national economy”.

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