Trai and Trai again: Telcos now warn of 100% tariff hikes

New Delhi: The game seems to be about making the numbers look scarier.

GSM telecom operators have been raising the bar higher each day over the size of tariff hikes required if the recommendations of the Telecom Regulatory Authority of India (Trai) on the base 2G spectrum auction price are implemented. Till early this week, they were warning of 25-30 percent increases in tariffs due to the high base prices. On Thursday, they raised the pitch by talking of a 100 percent increase - or a doubling of tariffs - if Trai’s recommendations are accepted.

Bharti Airtel’s Sanjay Kapoor, who also heads the Cellular Operators’ Association of India (COAI), said on Thursday that tariffs across the industry would double, while dismissing Trai’s own calculations of up to 2 paise per minute in terms of call rates. He also declared that contrary to popular belief, telcos had taken a 25 percent “price loss” in the last 10 quarters and were in no position to absorb the “tens of thousands of crores” impact which would befall them if the government were to accept Trai’s base price calculation for fresh 2G auctions.

The GSM biggies are sticking to their earlier demand of the auction price being indexed to the base price of the 2010 3G auction. The Trai has recommended an auction base price of Rs 3,622 crore for every megahertz of nationwide spectrum in the 1800 Mhz band compared to a price of around Rs 380 crore in the 2008 2G sale.

In 2010, it set the base price for 3G auctions at Rs 3,500 crore for a pan-India licence.

Vodafone’s Marten Pieters said that if the government were to accept Trai’s pricing math, India would be forced to pay 48 times higher price than any country across the world. He also said that across the world, urban mobile customers subsidise rural customers but if the government went ahead with its plan to ‘refarm’ 900 Mhz spectrum away from incumbent players, the situation would be reversed in India.

Trai has recommended that the 900 Mhz spectrum be taken away from incumbents, who will then have to bid for the less efficient 1,800 Mhz spectrum at the new price. This, GSM operators say, would lead to a complete disruption in rural connectivity and go against the very grain of the new proposed National Telecom Policy 2012.

They are also opposed to the new rollout obligations, saying there should instead be incentives for operators who manage faster rollouts and deeper penetration into the hinterland.

So what can the telcos do next? They have warned of extensive litigation and a no-show in the auctions in case the government does not heed their pleas. New telcos, such as Telenor, have already indicated they will pull out of India if auctions were to happen at the current prices. But with Communications Minister Kapil Sibal giving them a patient ear on Wednesday, and with the Telecom Commission already seeking several clarificstions from Trai on its assumptions for arriving at the suggested auction price, there may still be some hope.