Rajan S Mathews, the director general of COAI, has cried foul at the spectrum auction, giving the NDA government little time to bask in the glory of aggrandizement of its governance.
Some of the telecom stakeholders have termed the auction “black day of telecom industry” even as Prime Minister Narendra Modi-led BJP Government is mobilizing close to Rs 110,000 crore from telecom operators by selling them airwaves. The telecom industry is peeved that no foreign telecom entity showed interest in the Indian spectrum auction.
Indian telecom companies are investing less than $20 billion on spectrum in this round. The Obama administration had raised double that — $40 billion — selling spectrum in the U.S. It is understandable considering revenue from the services in both countries. Indian telecoms see monthly ARPU (average revenue per user) of $2 plus, while those in the US earn $45 and above on services.
Similarly, Indian critics say the spending on spectrum in the US cannot be compared with that in India. Capex (capital spending) by Airtel, for instance, is nowhere close to that of Verizon Wireless. The annual Capex of Verizon is around $18 billion against Bharti Airtel’s annual Capex of around $3.2 billion for Airtel Bangladesh, Sri Lanka and Africa.
The COAI chief claims the auction should push Indian telecoms into deep debts. He has statistics to support the emerging issue.
The Times of India has earlier carried a special story on debt concerns of Indian telecoms. Other newspapers said Sunil Mittal (chief of Bharti Airtel) and team (including his rivals such as Vodafone and Idea Cellular) will be enhancing telecom tariffs in line with their spectrum spend.
It is not mandatory or necessary that telecoms hike their cellular tariff after every spectrum auction. Operators increase mobile rates to increase profit. There is no other motivation.
COAI, which represents top telecom operators and network vendors in the country, has kept mum on quality of services in the recent past. It does not even mention customer issues. COAI’s usual response to queries on installations is that there are “no problems from telecom towers”. Rather, it focuses on what the government should do during annual budgets.
This time COAI, citing a TRAI statement, had said: “the upcoming spectrum auction is critical for the telecom service providers (TSPs) whose licenses are due to expire in 2015-16. In the 900 MHz band, only the spectrum held by them is available for the auction. These licensees will have to win back this spectrum to ensure business continuity in a License Service Area (LSA); if they don’t, it places the large investment made in the LSAs in jeopardy.”
Apart from the 2100 MHz band, all other spectrum bands auctioned were in-use spectrum and were being re-auctioned due to non-extension of licenses. Hence, aggressive bidding from the operators, especially for the 900 MHz spectrum, was inevitable, said COAI.
“The outcome of this auction, in whichever manner, will eventually lead to a significant outflow of funds and further burden the industry, which already remains under a debt of Rs 2.5 lakh crore,” said Rajan S Mathews of COAI.
COAI suggests that Indian telecoms will not have adequate funds left to support the India government objectives of NTP 2012 and the Digital India initiative.
But has any Indian telecom operator ever tried to achieve these targets? Indian mobile subscribers continue to face call drops and inadequate broadband coverage. Is COAI talking sense today? Over a period, our smart operators have partially exited the Indian broadband segment. This is because they are not minting money. At the same time, American telecoms are investing in high speed broadband to make money.
COAI says the increased financial burden will lead to the telecom industry’s cost structure being changed drastically. It also warns that operators will be with no choice but to increase the tariffs to meet the financial commitments to the government.
Have Indian mobile subscribers said ‘No’ to tariff hike? Indians want quality. Natives who have travelled abroad have experienced broadband and voice call services overseas. But COAI washes its hands off quality, arguing that Indian telecoms don’t have adequate spectrum to go by.
Modi and telecom minister Ravi Shankar Prasad need to listen to telecom operators as well. Indian telecom industry is the backbone of the economy. Let it grow on its own. BJP Government should not block its growth by selling spectrum. Also, telecoms can find new revenue streams. Overseas telecoms are talking M2M, enterprise strategies, and such other avenues of earnings.
Baburajan K and Ajith Kumar S