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Indian DoT dismisses case for tariff hikes following auctions

Despite the vast amounts bid for spectrum in the country’s latest round of auctions, the head of India’s Department of Telecom has claimed that there is “no case at all” for increasing tariffs.

Rakesh Garg, the country’s Telecom Secretary, has stated that since the country’s operators are making decent profits against manageable levels of debt, they would not need to take drastic action to deal with the “very marginal” cost increases incurred by their auction spends.

He added that since spectrum efficiency was improving and data was in high demand, profits and margins would be pushed up – particularly for the biggest players.

Garg’s comments go against the prognosis of outgoing TRAI chairman Rahul Khullar, who recently stated that operators’ spectrum investment could only be offset by increasing tariffs by as much as 15%. The Cellular Operators Association of India (COAI) has made similar warnings regarding the high reserve prices of spectrum in the auctions.

Eight operators bid in India’s latest round of auctions, raising INR1.1 trillion ($17.6 billion). Operators have expressed their belief that the high reserve prices for 2G and 3G spectrum will force them to increase tariffs, with outgoing Vodafone India CEO Martin Pieters noting that network investment would come under pressure.

COAI has observed that even before the auctions, the collective debt of the country’s operators totalled INR2.5 trillion. However, Garg claimed that it is “wrong to say that debt is crippling the Indian telecom industry”, noting that in Q3 last year, gross revenue was up year-on-year by 11%.

However, credit ratings firm Moody’s has deemed the auctions credit negative for the industry, suggesting that the high reserve prices will increase operators’ debt, adversely affecting their future investment funds.

 

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