Telecom industry warns of mobile tariff hike

A day ahead of a crucial Telecom Commission meeting on the auction of 2G spectrum, service operators on Wednesday warned the government and customers, saying the the high reserve price for spectrum, recommended by the telecom regulator, will lead to steep tariff hikes.

The Association of Unified Telecom Service Providers of India, the CDMA operators' body, said mobile services could become dearer by 28 paisa per minute if the recommendations by the Telecom Regulatory Authority of India are accepted in their current form.

The industry body of GSM service providers, Cellular Operators Association of India, said mobile charges will go up by 26 paisa per minute.

Trai has proposed a reserve price of Rs 3,622 crore for auction of 2G spectrum (1,800 Mhz), much higher than the Rs 1,657 crore (Rs 16.57 billion) operators paid at the time of the previous allocation.

The regulator has also suggested double the base price of airwaves in the 800 Mhz and 900 Mhz bands to Rs 7,244 crore per unit for pan-India bandwidth.

The tariff hike claims of both the industry bodies are much higher than the estimates set out by Trai in its recommendations.

Trai in its "Recommendations on Auction of Spectrum", released on April 23, said the estimated cost per minute could go up by 4.4 paise due to the auction of spectrum.

The current call charges vary from 50-60 paisa per minute.

A committee of the department of telecommunications, set up to look into the recommendations, has suggested an increase in the reserve price. Reviewing the recommendations, the DoT committee suggested that the reserve price for second-generation airwaves in the 1800 MHz band be revised to Rs 4,245

crore per unit.

The Telecom Commission will among other things review the DoT committee's proposals on the auction price in tomorrow's meeting.

It will send its recommendations to the empowered group of ministers for the spectrum auction, headed by Finance Minister Pranab Mukherjee, for a final decision.

The eGoM will take a final view.

The Telecom Commission is the highest decision making body of the DoT and has members from several government departments, including finance, the Planning Commission and others.

Service providers such as Bharti Airtel and Tata Teleservices have been arguing that high reserve price for the 2G spectrum will leave them with no choice but to hike the tariffs.

"Any hypothetical service provider model shall lead to a significant increase in customer tariff well beyond 28 paisa per minute and not 4.4 paisa per minute as suggested by Trai," Auspi Secretary General S C Khanna on Wednesday said at a conference.

Accounting firm PricewaterhouseCoopers, in a report released at a COAI event on Tuesday, said the recommendations, if accepted in its current form, could cause a mobile tariff hike of almost 90 paise per minute in metro cities.

According Rajat Mukarji, chief operating officer of Idea Cellular Ltd: "While Indian operators have absorbed cost increases in the past, including after the 3G auctions of 2010, due to erosion of margins in the past few years we do not believe the industry has the capability to do so further."