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Tariffs to rise by 90p/min

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Tariffs to rise by 90p/min in metros if Trai proposals accepted: PricewaterhouseCoopers

Mobile phone companies and the telecom department have come up with sharply contradicting figures of the impact on consumers if sector regulator Trai's recommendations on spectrum pricing are accepted.

The industry body representing GSM-based operators and research firm PwC on Tuesday warned that tariffs would go up by as much 90 paise per minute in metros, and between 29 and 34 paise in the rest of the country, if the government were to accept Trai's proposal to raise 2G spectrum prices by as much as 13 times.

The study, which PwC produced for the Cellular Operator Association of India, also added that the debt burden of India's beleaguered mobile phone companies would increase by an additional $50 billion over the next five years.

But a telecom department internal note, reviewed by ET, has estimated that Trai's recommendation would translate into just 5.2 paise per minute hike in call rates for subscribers in 2012-13. The note also said that the increased spectrum cost would translate to a mere 2 paise per minute jump in call tariffs annually over 20 years, the tenure of the airwaves. At present, voice tariffs range from 40 to 80 paise per minute in the 14-player telecom market in India.

If a new entrant such as Norway's Telenor were to win back its mobile permits in the upcoming auctions, higher spectrum costs would only require the company to raise tariffs by 14 paise per minute in the first year, according to the department's calculations. The impact of the higher spectrum cost would reduce progressively to a mere 5 paise/minute by the 20th year, the note said.

The DoT's calculations are largely in line with Trai's estimates that incumbents would have to increase tariffs by 4.4 paise/minute in the first year and new entrants by 11 paise per minute if its recommendations are accepted by the government. Trai has also said that higher spectrum costs would result in an average increase in call rates by 1.7 paise per minute annually over a 20-year period.

Last month, Trai had proposed that mobile phone companies which lost their permits after the SC cancelled licences awarded in the scandal-tainted 2008 sale will have to pay a minimum Rs 3622.18 crore for every unit of 2G spectrum in the 1,800 MHz band. Existing telcos will also have to shell out this amount if they want additional airwaves. The DoT is pressing for 17% increase in the base price for the 2G spectrum bids over the rate proposed by Trai.

The PwC-COAI study has slammed Trai's calculations on the impact of spectrum prices on tariffs and states that the regulator's calculations had many flaws.

"First, the regulator counted incoming and outgoing minutes instead of only outgoing minutes of use, underestimating by half the actual impact on cost per minute. Secondly, it has not considered the additional cost that will be incurred by telcos of extension of licences for renewal.

The assumption that data services to provide 50% of total revenue over the next few years is incorrect," PwC India's executive director Mohammad Chowdhury said.


-Economic Times
 
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