Govt makes billions at mobile consumers cost, tariff to go up

With heavy debt burden of Rs 3.5 lakh crore the telecom firms will compromise on services

GN Bureau | March 26, 2015


#mobile tariffs   #telecom   #airtel   #Vodafone   #idea celluar   #uninor   #reliance   #spectrum   #auction  

The government is happy that it made a killing by selling spectrum. The spectrum was sold at about 68 per cent premium, at Rs 1,09,874.91 crore ($17.6 billion) and the telecom companies borrowed heavily to finance this buying.  With debt burden close to Rs 3.5 lakh crore there is bound to be heft hike in tariff to pay for interests.  So, who will benefit from this auction and government chest-thumping?

"Telecom industry which was already saddled with nearly Rs 2.5 lakh crores is now going to helplessly see it mount to nearly Rs 3.5 lakh crores," Assocham Telecom Council Chairman T V Ramachandran has said in a statement.

Ramachandran said that "consumer tariffs are bound to rise significantly but, due to the level of hyper-competition present here, the increase would not be anywhere near adequate to cover the higher cost".

The cash outgo may restrict roll out of networks and affect the basic objectivity of sector to provide telecom connectivity to people. This means there would be congestion in call connection and dangers of call droppings will be frequent.

At the base price fixed by the government, the spectrum value was Rs 65,463.40 crore and many telecom companies had to participate in this auction to retain their licences. Some comes came in to increase their acquisitions.

Idea Cellular, Airtel, Vodafone and Reliance Communications had to hold on to their operational circles as per their licence, while Reliance Jio, Tata Teleservices, Telewings (Uninor) and Aircel pitched for additional spectrum.

Even then about 11 per cent remained unsold in 800 Mhz, 1800 Mhz and 2100 Mhz (3G) band.

"While this is no doubt beneficial for addressing the fiscal deficit, the outcome does raise some important concerns not only for the industry but also, more importantly the consumer - the 'Aam Aadmi', and for the national economy," Ramachandran has said.

Meanwhile, the supreme court on Thursday allowed the government to finalise the spectrum auction bids and collect the initial payment amounting to Rs 28,000 crore out of Rs 1.09 lakh crore from the successful telecom companies before March 31.

The court, however, stated that the final allocation will be subject to the decision of the court after hearing all parties, starting April 16.

The bench headed by Justice Dipak Misra passed the order after hearing Attorney General Mukul Rohtagi who submitted that cash payment of Rs 28,000 as immediate initial payment will help the budget and it is in the budget proposals.

The court noted the arguments of the telecom companies that they were challenging the “entire design of the auction”, as their counsel P Chidambaram put it.  They wanted the earlier order suspending the finalization of the bids to continue, but the court observed that “We cannot block so much money. Let the government collect the money.”

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