Mobile service provider’s association COAI has sought clarification from the Indian telecom ministry on the viability of the sector in the wake of the huge spectrum fee – around Rs 1 lakh crore or $18 billion for 20-year licenses.

Communications & IT minister Ravi Shankar Prasad and DoT Secretary Rakesh Garg earlier opined that mobile tariffs in India will not increase beyond 1.3 paise per minute on account of the spectrum fee. Earlier, several telecom operators including Bharti Airtel warned that the impact of spectrum fee will be an increase in telecom charges to subscribers.

Rakesh Garg said that “the spectrum has been given for 20 years and if you give it for 20 years per annum expenditure is hardly Rs 5,300 crore and the turnover of this industry at the moment at the present rate is approximately Rs 2 lakh crore. If you divided with the number of minutes which are being used that moment the whole amount of Rs 5,300 crore it comes approximately 1.3 paisa per minute which is hardly any amount.”

COAI said that the telecom industry’s analysis of the financial implications of the auction indicates an increase of more than 12-15 percent on the present tariffs, to make up for the cash outflows of the operators.

According to COAI, DoT has not considered inflation. At the current average annual inflation rate of 6-7 percent, tariff increase will be significantly.

Indian telecom operators pay nearly 60-70 times the cost of spectrum in other countries. On top of this, there is an interest on the debt. The industry already incurs an expenditure of almost $7-8 billion per annum on purchase of equipment, which is expected to increase further as a result of the revised license conditions to roll-out networks to the block level and gram panchayat level in the rural areas.

The Indian telecom operators are also required to pay almost 13-14 percent of their revenues in the form of License Fee and Spectrum Usage Charge (SUC). On the other hand, the average ARPU of Indian Telecom Service Providers (TSPs) is merely $2.96, compared to an international average of $35-40.

COAI states that the statements from DoT is confusing for the telecom industry, that after taking all the factors such as inflation, high spectrum costs, high cost for equipment and substantial regulatory costs, combined with low returns.

The telecom industry association wants an answer from the telecom minister on the viability of the sector without increasing the tariff.

Baburajan K
[email protected]