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High spectrum cost may hit profits, tariffs

business Updated: Jun 11, 2010 22:16 IST
HT Correspondent

Scarcity of spectrum slots and a high level of competition led to excessively high spectrum prices, telecom service providers said.

Leading players like Tata Communications, Vodafone Essar and Idea Cellular could not win even a single circle, while Bharti Airtel was limited to four circles. Aircel managed to bag eight, but all are in category “B” and “C” circles.

“A combination of scarcity of slots and the auction format resulted in extremely high price levels,” a Bharti Airtel official said.

“The winning bids are in excess of what current broadband business cases can support and seem to reflect perceived scarcity and limited number of slots on auction. We are disappointed with the outcome,” said Srinivasa Addepalli, Sr VP (Corporate Strategy), Tata Communications.

Vodafone found the pricing high. “We are well positioned to offer high-speed data services via 3G. We decided to step away from BWA when prices went beyond rational levels,” said a Vodafone official.

Analysts fear the high costs may impact tariffs. “The results of the BWA auction point to a ‘high cost-high tariff’ regime in the near term as operators try to recover their investments,” said Naveen Mishra, lead telecoms analyst, IDC India.

Others do not agree. “The fee would be amortised over 20 years and hence would not have much impact on tariff,” an industry official said on the condition of anonymity.