Phone bills may go up by 3 paise a min | india | Hindustan Times
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Phone bills may go up by 3 paise a min

india Updated: Apr 25, 2012 01:46 IST
Manoj Gairola

Telecom tariffs may go up by only 3 paise per minute, if the operators pass on the cost of the 10 times higher spectrum prices to the consumer.

In its recommendations on spectrum auction submitted to the government on Monday, the Telecom Regulatory Authority of India (TRAI) proposed a reserve price of Rs. 3,622 per MHz - a unit to measure frequency - against the Rs. 375 crore per MHz price that the existing operators paid.

If the government accepts the recommendation , the operators may have to pay about Rs. 700,000 crore in the next 10-15 years to the government for the existing and future spectrum.

A TRAI estimate said Indian mobile users - there are more than 900 million of them - are expected to use up 340,260 crore minutes this financial year.

Combining this with the fact that the spectrum is being issued for 20 years, the cost increase comes to 3 paise per minute.

And since the average tariff for a one-minute local call now is 50 paise, the impact will be only 6%.

But an official of a new telecom service provider pointed out that the prices may go up further if the new operators decided to stay away from the auction process and would result in less competition in the market.

He said the factors that might discourage the new players are market uncertainty and high spectrum prices. Tariffs came down from Rs. 1 to 50 paise per minute when the new providers launched services.

But if the auction goes well, "the cost of spectrum as percentage of total service cost is very low. Hence, it will not have much impact on tariff," said JS Sarma, chairman of TRAI.

"Simple economics will show that tariff will not go up significantly. But I believe that the growth and quality of network will suffer due to the higher price of spectrum," said Mahesh Uppal, a Delhi-based analyst.