High spectrum prices could lead to hike in telecom tariffs: COAI

The exorbitant winning price points for the operators at the spectrum auctions will eventually lead to a significant outflow of funds and further burden the industry. The operators will not be left with much of a choice but to increase the tariffs so as to meet the financial commitments to the government, according to GSM operators' body Cellular Operators' Association of India (COAI).

COAI represents seven of the largest mobile service operators and majority of telecom equipment manufacturers in the country.

The way the government structured the final auction, guaranteed that the maximum revenue be extracted from the industry. This was also highlighted by the TRAI stating that the auction is ''critical'' for the Telecom Service Providers (TSPs) whose licences are due to expire in 2015-16, COAI said in a statement.

''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 Rs2,50,000 crore. In terms of meeting the government objectives of NTP 2012 and the Digital India initiative, it will have to be seen if the operators are left with the requisite financial resources to invest in networks and marketing after bearing the high spectrum costs,'' said Rajan S Mathews, director-general of COAI.

''The increased financial burden will lead to the industry's cost structure being changed drastically. Hence, the operators will not be left with much choice but to increase the tariffs so as to meet the financial commitments to the government. We are awaiting official details of the results with the list of the winners, to understand and figure out the way ahead hereon,'' Mathews added.

In the 900 MHz band, only the spectrum held by operators were put on block, meaning that licensees will have to win back this spectrum to ensure business continuity in a licence service area.

''If they don't, it places the large investment made in the LSAs in jeopardy,'' it added.

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 licences. Hence, aggressive bidding from the operators, especially for the 900 MHz spectrum, was inevitable.

The government has garnered about Rs1,10,000 crore for the operators on account of the airwaves sold in the auction. In comparison to the Rs82,000 crore expected by the government to be generated from this auction, there has been almost a 33 per cent increase in the realised prices.