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Tariff to rise by 90 paise in metros on TRAI proposal: PwC

Last Updated: Tuesday, May 22, 2012 - 20:52

New Delhi: Telecom tariffs in metros will go up by 90 paise if government accepts the spectrum price recommended by sectoral regulator TRAI, consultancy firm PricewaterhouseCoopers (PwC) said Tuesday.

"The recommended spectrum price of TRAI will lead to tariff hike of 90 paise in metros. All India average will be 34 paise. TRAI did not consider basic facts while arriving at price impact on tariff," PwC India's Executive Director Mohammad Chowdhury told reporters here.

Telecom industry body COAI and PwC have jointly done the assesment of spectrum auction recommendations of Telecom Regulatory Authority of India (TRAI).

The regulator has recommended a minimum price of Rs 3,622 crore for a unit of spectrum. TRAI has also recommended doubling of this amount for airwaves that is being used by incumbent GSM operators at the time of renewal of their licence.

Considering all the factors, TRAI said that impact on telecom tariff will be aorund 4.4 paisa in Financial Year 2013.

"TRAI did not consider many factors while making calculations. It did not calculate the impact of price on the basis of outgoing minutes which generate revenue for telecom operators. Also it ignored the trend which it pointed out in its own report," Chowdhury said.

PwC said that TRAI has assumed that subscribers will grow for a typical operator by 40 percent between FY 2012 to FY2013 and 258 percent increase by FY 2032.

"By calculation this implies that minutes of usage (an indicator of telecom services consumption) per subscriber increases by 83 percent. This is not in line with current trends wherein there has been a year-on-year reduction in MOU per subscriber between 2008 and 2011," Chowdhury said.

Speaking on the behalf of Cellular Operators Association of India (COAI), Rajat Mukarji of Idea Cellular termed TRAI method of calculating spectrum price in comparison to 3G price "fundamentally flawed".

"The (TRAI) calculations are fundamentally flawed. We are looking at what TRAI has come up with in its calculations and we re-computed all the calculation on the actual live ground situation," Mukarji said.

Chowdhury said that the industry is under huge debts and the recommended price will pose a challenge on seeking loan from banks.

"Assuming the spectrum acquisitions as set out by TRAI in its recommendation are debt funded, we estimate that the industry will need to further increase its current debt burden of Rs 185,720 crore by approximately Rs 272,000 crore over next five years," Chowdhury said.

The PwC official said that whenever ratio of debt against cash flow (EBIDTA) exceeds 3 in the telecom sector, it becomes difficult for operators to satisfy credit worthiness to banks for further lending.

"Including domestic and external debt, the debt is to EBIDTA ratio in Indian telecoms has risen from 3 in 2009 to 4.87 in 2012. Assuming the spectrum acquisition going forward will be debt-funded, the debt is to EBIDTA ratio impact due to spectrum auction, will further rise by 7 to 8 times by 2015- 16," he said.

Chowdhury, further, highlighted that increase in call cost will reduce MOU instead of increasing them.

"A 2 percent increase in call costs across the industry in Q2 (second quarter), 2011 resulted in a decline of 1.45 percent in MOU per subscriber between Q1 to Q2 , 2011," Chowdhury said.


First Published: Tuesday, May 22, 2012 - 18:15
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