Telecom service providers on Thursday claimed that tariffs may rise by 25 to 30% on account of high spectrum prices, if the government accepts recommendations of the Telecom Regulatory Authority of India (TRAI).
The regulator strongly refuted their figures and said that the impact will be only between 3% and 6%, if at all."I do not agree with the operators who have come out with such figures," said TRAI chairman JS Sarma. "The amount of increase will be only between 1.5 and 3 paise per minute. Even here the competition will take care (to ensure low tariffs)."
India has a huge mobile subscriber base of over 900 million and they are expected to talk 340260 crore minutes in the current fiscal year, according to TRAI estimates. Moreover, spectrum is issued for 20 years. As a result the increase in cost per minute is only between 1.5 and 3 paise, it says. At present, average tariff for a one-minute local call is 50 paise.
“We are transparent and our calculations are put on the Web as part of the recommendations," said Sarma, defending the recommendations on which the government is yet to take a decision.
Cellular operators, however, say that if the adverse effect of the high tariffs on demand is also taken into account, the hit they take will be very high.
In its recommendations on the auction of spectrum submitted to the government last month, the TRAI proposed a reserve price of Rs.3,622 per MHz, which is about 10 times more than the price at which old incumbent operators got spectrum.
“The cost of spectrum as a total percentage of service cost is very low,” said Sarma.
“Simple economics will show that tariff will not go up significantly due to higher spectrum prices,” said Mahesh Uppal, a Delhi-based analyst. “I do not expect an overnight steep rise. However, a slow and steady price rise can not be ruled out as all the operators will be hurt.”