Following the announcement of the reserve price for spectrum for the upcoming 2G auction, by the Indian government, telcos expressed their dismay at the high prices and have indicated that there will be an upward revision of tariffs as they pass on the burden of their investments to the end-consumer. Here’s what they’re saying:
– Base price would not affect us: BSNL– Chairman and Managing Director R K Upadhyay said that the 2G reserve price would not affect BSNL, however he did admit that it would be disadvantageous to the state owned telco, if the renewal process is undertaken. Read more at The Economics Times
– Airtel says it might increase tariff: Bharti Airtel, has said that it was disappointed with the unreasonably high 2G reserve price announced by the government as it will lead to increased tariffs for consumers. The company also feels that the spectrum usage price of 3% to 8% is high, a sit should be just enough to take care of administrative expenses, when spectrum was already being auctioned. The company’s CEO also added that the system favoured dual-technology telcos. read more at The Times of India.
– COAI indicates 30p/min rise in tariff, Idea says no business case at Rs 14,000 crore: Rajan S Mathews, Director General of Cellular Operators Association of India, said that the higher prices would lead to a rise of 30 paise a minute in tariffs, and that tecos would have to raise additional debt of Rs 3,25,000 crore to fund bids, and that banks don’t have that bandwidth.
Idea Cellular CEO, Himanshu Kapania said that the company was losing Rs 170 crore on EBITDA every quarter and that there was no business case at Rs 1650 crore leave alone Rs 14,000 crore as reserve price. Vodafone also shared the same sentiment and said that the price should have been 80% lower, and that metros and category A circles would remain out of reach for telcos. Read more at Business Standard
– Impact on tariff by 3-4 paise: Citing sources, UTV Bloomberg reports that the reserve price will have 3-4 paise impact on tariffs and that DoT officials expect at least three players to participate in the 2G auction. Read more at Your Money Site
– Govt. has priced the spectrum right: R Jagannathan– Writing on Firstpost, Jagannathan has said that the government has taken the right decision as spectrum is a scarce resource, and that telcos have to only pay one-third of the auction price upfront, and the rest in 12 years time. He has the view that spectrum can also be mortgaged to banks who can then conduct auctions in case a telco exits. Read more at Firstpost
– High Price bad for new players, industry:ET – In an editorial, The Economic Times, has said that the high base prices could signal to prospective new entrants that they are not welcome to enter the market, at a time when the government has not decided whether incumbents have to pay similar amounts for the spectrum they hold. The publication feels that the pricing will lead to less number of bidders at the auctions and could reduce competitiveness in the market. Read more at The Economic Times