Mobile rates may go up with rise in spectrum price

High spectrum charges would lead to rise in mobile services rates and adversely impact government's Digital India initiative by impeding telecom network expansion, industry said.

"High reserve prices will adversely impact the business viability of the operators ... it will lead to increased tariffs, thereby hurting the government's targets of affordability, rural penetration and Digital India," industry body COAI Director General Rajan S Mathews said in a letter to Telecom Minister Ravi Shankar Prasad.

COAI said that telecom operators are reeling under debt burden of Rs 2.5 lakh crore. The association is learnt to have written same to Prime Minister Narendra Modi and his Principal Secretary Nripendra Mishra.

The Cabinet on January 5 approved a reserve price of Rs 3,646 crore pan-India per MHz in 800 MHz, Rs 3,980 crore for 900 MHz band pan India excluding Delhi, Mumbai, Kolkata, and J&K; Rs 2,191 crore pan India (excluding Maharashtra and West Bengal) in 1800 MHz band.

The spectrum in 900 Mhz band being put for auction is currently held by Airtel, Vodafone, Idea Cellular and Reliance Communications through their licences expiring in 2015-16.

The Cellular Operators Association of India said that government has increased price of spectrum in 900 Mhz band by 32.5 per cent over price suggested by Telecom Regulatory Authority of India and are about 107 per cent higher compared to amount paid by companies for 3G spectrum in 2010.

"If reaching out an affordable service to the last man is the objective then there has to be a reasonable compromise between the money industry has to pay for the airwaves to the Government," Assocham said in a statement.

It added that government is pressing the TRAI to raise the reserve price despite the bitter experience in past which is bound to disturb success of the Indian telecom industry that was able to offer the cheapest service to the people.

The government also has plans to auction 3G spectrum in upcoming auction and is working to determine it base price.

"On the 2.1 GHz auction for 3G, the latest development is that the independent regulator had suggested a reserve price of Rs 2,720 crore per MHz but the DoT claimed it should be Rs 3,999 per MHz based on inflation indexing of what was received at the last auction and other considerations," Assocham said.

Both the bodies expressed concern over only 5 Mhz of 3G spectrum being put for auction compared to 20 Mhz being demanded by telecom operators.

"The government has also further jacked up its advantage by restricting the spectrum to 5MHz only with a promise that a further 15 MHz would be made available," Assocham said.