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Telcos hit, consumers safe

india Updated: May 12, 2010 23:49 IST
HT Correspondent

While incumbent mobile service providers are crying hoarse and face a big spectrum charge, consumers appear safe because of cut-throat competition.

The government would have to decide on the recommendations of the Telecom Regulatory Authority of India (TRAI) which this week asked incumbents to pay for 2G spectrum beyond the startup quota.

In every service area there are several service players, up to a dozen in some zones, with many in the queue for spectrum to pinch incumbent players.

“The TRAI recommendations will not have any impact on tariffs,” said Mahesh Uppal, director, Com First, a telecom consultancy firm. “It depends on market conditions. If someone else is charging less, you have to respond in kind. New operators will continue to charge less as they have to be price competitive to attract consumers.”

Mumbai alone has 12 service providers. Of these, only four– Loop, Vodafone, MTNL and Bharti – hold more than the startup spectrum of 6.2 MHz that comes with the licence, beyond which the firms have to pay. While Idea, Aircel, Reliance Communications and Tata Teleservices, Etisalat, Videocon, and Unitech, have only 4.4 MHz of spectrum. Sistema Shyam, the only CDMA operator, will also not be required to pay for additional spectrum.

Only four players each in Mumbai and Delhi would have to pay for extra spectrum, leaving others to keep up price pressures.

“We will continue offering at lower prices but new operators will reduce the appetite for a tariff war. This is a favourable situation for us,” said the head of a new telecom service company.

“In the short term TRAI recommendations will not have any impact on tariff,” R.S.P. Sinha, former MTNL chairman.

Incumbent leaders forced to bite the bullet on spectrum fees are obviously upset with the TRAI recommendations, though Reliance Communications, a CDMA leader, welcomed the move, saying it would boost rural telephony.

“We believe they are retrograde for the industry and against the interest of consumers,” said Vodafone Essar in a statement.

Bharti Airtel called the recommendations “shocking, arbitrary and retrogade.”