2G auction a hit, but call rates set to rise
Mobile tariffs in India are set to rise after telecom operators bid aggressively to win airwaves in the just concluded spectrum auction. Market leader Bharti Airtel and second biggest carrier Vodafone bought airwaves worth nearly Rs 18,600 crore each in the hotly contested auction.
Telecom companies will be paying nearly Rs 61,000 crore to the government, much more than the reserve price of Rs 41,000 crore. For the efficient 900 MHz spectrum, Bharti Airtel, Vodafone and Idea paid a premium of 84 per cent above the reserve price. (Read the full story here)
Sanjay Kapoor, former chief executive officer of Bharti Airtel told NDTV that spectrum in India is the most expensive in the world and no incumbent would be happy with these prices.
Analysts now expect mobile operators to raise call rates to compensate for higher spectrum charges. Bharti Airtel, Vodafone and Idea last year raised voice prices for the first time in three years. Mobile companies have also been cutting discounts previously offered to lure customers in a highly-competitive market.
Telecom Minister Kapil Sibal on Thursday told reporters that despite competitive bidding he expects tariffs to remain "reasonable" in the years to come, but analysts said the trend of higher call rates and cut back in discounts will now be the norm.
A Bank of America Merrill Lynch analyst told NDTV that auction outcome does involve financial stress and tariff increases are the only upside catalyst for mobile companies.
According to early estimates, Bharti Airtel's debt will go up by 33 per cent in 2014-15, while Idea Cellular's debt will go up by a massive 179 per cent because of spectrum payout. (Track: Which companies won most spectrum)
Call rates in India are among the cheapest in the world, but prices have gone up since a Supreme Court order revoked permits of some smaller carriers reducing competition. There are still about a dozen players, but the top three telecom operators now account for more than 70 per cent of mobile industry revenue.