The Cellular Operators Association of India (COAI) has expressed unhappiness with the government?s decision to set reserve price for the forthcoming spectrum price at Rs 140 billion.
Issuing a statement on the high reserve price set by the government for the spectrum auction, COAI, has said, ?The Cabinet?s decision of fixing the reserve price for re-auction of 2G spectrum at Rs 140 billion/5MHz will impact tariffs to the tune of Re 0.37 to 0.49 per minute.?
It has termed cabinet?s decision against consumer interest and said that it would have severe repercussions on the future viability of the industry.
According to the COAI, the industry?s total debt will increase substantially owing to high reserve price. The reserve price for India is way above the international reserve price per MHz per population. The reserve price per MHz per population in India (on purchasing power parity basis) of Rs 19.68 is enormously high as compared to Rs 1.06 that Ofcom (the telecom regulator of the United Kingdom) has recently announced for auction of 1800 MHz band. Similarly, for the 800 MHZ band, Ofcom has announced a reserve price that works out to Rs 3.18 per MHz per population while that of India stands at Rs 25.58 per MHz per population. Hence, it occurs that the Indian operator will have to shell out 1700 per cent more than the UK operator for the same amount of spectrum in the 1800 MHz band and 700 per cent more in the 800 MHz band. The Cabinet has not given due consideration to the fundamental issue of unsustainable high reserve prices which will significantly increase costs, thereby invariably increasing the tariffs.
COAI also reiterates that continuing the slab-wise system for Spectrum Usage Charge (SUC) is unfair and will lead to continuation of the non-level playing field within the industry; as the dual spectrum operators are paying separate spectrum charges for 800 MHz and 1800 MHz; thereby enjoying a lower charge and causing significant losses to the exchequer. Internationally practices maintain that where spectrum has been allocated through the auction process, SUC is fixed at a nominal rate not exceeding 1 per cent to recover the administrative costs associated with managing spectrum.
According to COAI the cabinet?s decision will severely affect the sustainability of the sector and further add to the investment drought that the sector is witnessing of late. The increased tariff will also defeat the Government?s objective of offering affordable communication services to the people. The increased tariff will add to the woes of Indian subscribers who are already weathering the high rates of inflation.
