The Telecom Regulatory Authority of India (TRAI) is of the view that the aggressive bidding witnessed in the recently concluded spectrum auctions will drive up the costs for the telecom companies by 12-15 per cent. This increase in cost will be passed to the consumers in the form of higher voice tariffs, which are expected to rise by 6-7 paise per minute.

A similar view was echoed by the Cellular Operators Association of India (COAI) which stated that the rise in tariffs due to high spectrum payment costs would be about 12 per cent-15 per cent.

However, the Department of Telecommunications had estimated the tariffs to rise by 1.30 paise per minute. COAI had refuted DoT’s estimate stating that the former had not factored in inflation in its estimates, which is inevitable over a long period of 20 years. Apart from this, the government also did not factor in the element of interest on the debt that needs to be raised to meet the current spectrum requirements of the industry and spectrum purchases to be made in the future.

COAI further stated that the industry presently incurs an expenditure of almost $7-8 billion a year on purchase of equipment. This can also increase as a result of the revised licence conditions to roll out networks to the block level and gram panchayat level in the rural areas. Therefore, a hike of 1.30 paise per minute in tariffs will not be sufficient to address the industry’s financial issues.