Telcos lob cost grenade at Sibal: Tariffs will rise 40%

New Delhi: Top telcos have thrown a bombshell in telecom minister Kapil Sibal’s court. In a joint letter to the minister, they have said if he accepts the “astronomical spectrum pricing” as suggested by the Telecom Regulatory Authority of India (TRAI), the impact of spectrum fee to be paid at the time of extension of license for Delhi Circle alone would result in an increased cost of around 40% for the customers of Delhi. So in effect, either the Government listens to these telcos and reworks the spectrum math or mobile customers in top metros may see significantly inflated bills.

[caption id=“attachment_291483” align=“alignleft” width=“380” caption=“Either the Government listens to these telcos and reworks the spectrum math or mobile customers in top metros may see significantly inflated bills.PTI”]  [/caption]

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Chief Executive Officers of Airtel, Vodafone, Idea, Uninor and Videocon have signed this letter, addressed to Sibal. In addition to indicating a 40% hike in cost to Delhi customers, they have said that “if the spectrum entry fee of the operators whose license are to be extended during next 5 years is considered than there would be an estimated impact of at least 25-30% of increased cost to customers of those circles. Therefore, these operators would not be left with any other alternative than to increase the tariffs. The refarming (of spectrum) would also have its own impact on tariffs. Such an increase in per minute cost would be further aggravated due to reduction in MoUs after the increased tariffs and will result in further increase in the tariffs.”

The telcos’ estimates on tariff hikes, though they themselves have termed these preliminary, are at wide variance with TRAI’s projection of hikes to the tune of 1.5-2 paise only.

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So the telecom companies have sought a whopping 80% reduction in the reserve price for spectrum - TRAI has said 2G will be 1.08 times the auction price of 3G in 2010. They also want all roll out obligations for auctioned spectrum to be dispensed with besides summarily rejecting the TRAI proposal on refarming of 900 mhz spectrum.

Accusing TRAI of creating artificial spectrum scarcity by deciding to auction only 5 mhz in the 1800 mhz band this fiscal, these telcos have said “this will result in a totally unrealistic and inflated market value caused through creation of artificial scarcity. By severely throttling the supply to 5MHz, TRAI is trying to artificially distort the auction result, going against the directions of the Supreme Court.”

The telcos are unhappy even about TRAI’s assertion that since the new spectrum would be technology agnostic - 2G, 3G or 4G services can be offered under any band - therefore the reserve price proposed by it is justified. The operators point out that the supporting eco-system (network equipment, handsets, etc.), of futuristic technology is non-existent at present.“The development of a mature eco-system is at least five years away. Therefore any higher spectrum fee just to change the tag of the spectrum to liberalised while it continues to be used for 2G services is totally unjustified.”

Their other grouse is alleged favour shown to dual technology players (read Tata Teleservices and Reliance Communications) and therefore distortion of a level playing field for GSM operators by agreeing to refarming. “Not only has the GSM spectrum (1800 MHz) granted to Dual spectrum operators not been included for cancellation, but their position is sought to be further legitimized by giving them a further 1.25MHz GSM spectrum,” the telcos alleged. ends