TRAI recommendations to hike tariff by 90p in metros, says PwC

Reports about the Telecom Regulatory Authority of India’s (TRAI) recommendations

Reports about the Telecom Regulatory Authority of India’s (TRAI) recommendations on spectrum pricing have been grabbing viable news slots, since a while now. What followed were a series of reports stating that the telecoms warned that a tariff hike would become imminent, if the government accepted TRAI’s recommendations. In one of our earlier reports, too, the opinions of Auspi (Association of Unified Telecom Service Providers of India), a body representing CDMA and dual-technology mobile operators, like Sistema Shyam, Reliance Communications and Tata Teleservices were stated, wherein Auspi stated that the reserve price recommended by TRAI for auctioning the 800MHz airwave band could lead to doubling of call tariffs. 


Now, a similar opinion by PricewaterhouseCoopers (PwC) came up, when the consultancy firm in a statement yesterday revealed that if the government did accept TRAI’s recommendations on the spectrum pricing, then mobile tariffs would go up by 90p in the metros. PwC India's Executive Director Mohammad Chowdhury was quoted as saying, “The recommended spectrum price of Trai will lead to tariff hike of 90 paise in metros. All India average will be 34 paise. Trai did not consider basic facts while arriving at price impact on tariff.” 


Reports further add that TRAI recommended a minimum price of Rs 3,622 crore for a unit of spectrum. In addition to this, the regulatory body also recommended "doubling of this amount for airwaves that is being used by incumbent GSM operators at the time of renewal of their licence." Both PwC and COAI (Cellular Operators Association of India) assessed TRAI's spectrum auction recommendations together. The COAI, which is a non-government body aiming to aid service providers to establish and maintain world class, affordable mobile services in India, too was in the news, recently. COAI, reportedly was not happy one bit with TRAI's recommendations and went on to add that the regulatory body "has been pushing flawed recommendations, along with being biased."


 TRAI recommendations to hike tariff by 90p in metros, says PwC

90p hike?



COAI, in one of our earlier reports had stated that TRAI has ignored the industry representations and continues to burden the sector with its erroneous and unfair recommendations for the reserve price for auction of the spectrum. The body added that it believes this would further lead to serious public interest and public policy impacts and could critically detriment interests of the consumers. PwC India's Executive Director Mohammad Chowdhury was further quoted as saying, "Trai did not consider many factors while making calculations. It did not calculate the impact of price on the basis of outgoing minutes which generate revenue for telecom operators. Also it ignored the trend which it pointed out in its own report."


The report has PwC stating that the regulatory body assumed that for a typical operator, subscribers will grow by 40 per cent between FY 2012 to FY2013 and 258 per cent increase by FY 2032. To this, Chowdhury stated, "By calculation this implies that minutes of usage (an indicator of telecom services consumption) per subscriber increases by 83 per cent. This is not in line with current trends wherein there has been a year-on-year reduction in MOU per subscriber between 2008 and 2011."


Another mention in the report was quite alarming. It stated that the industry is under a lot of debt and the recommended price will make it difficult to obtain a bank loan. "Assuming the spectrum acquisitions as set out by Trai in its recommendation are debt funded, we estimate that the industry will need to further increase its current debt burden of Rs 185,720 crore by approximately Rs 272,000 crore over next five years," the Executive Director of PwC India was further quoted as saying. 


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