Thomas K Thomas

TRAI: Our spectrum plan will be win-win for operators, Govt

Thomas K. Thomas New Delhi | Updated on August 11, 2012 Published on July 13, 2012

This is contrary to claims made by the telecom companies, which had earlier said that tariffs could go up by as much as 90 paise if the TRAI proposals are implemented.   -  Business Line

The TRAI Chairman, Dr Rahul Khullar (file photo). He told the Empowered Group of Ministers that the operators’ profitability will improve even if the tariffs are increased by just 5 paise.

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The Telecom Regulatory Authority of India says accepting its spectrum pricing proposal will be win-win for both the Government and the telecom companies.

TRAI, under its new Chairman, Dr Rahul Khullar, said that while tariffs will move up by 5-10 paise a minute, operators’ EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins will increase up to 40 per cent over the next 20 years compared to just 6.5 per cent in 2012-13. The Government would stand to gain nearly Rs 7 lakh crore by imposing a higher fee, the telecom sector regulator had said while presenting an analysis of its recommendations to the Empowered Group of Ministers on Thursday.

In April, TRAI had suggested fixing Rs 18,000 crore as the reserve price for 5 Mhz of spectrum. But mobile companies opposed this on grounds they will be forced to hike tariffs by as much as 90 paise a minute.

Trashing claims by the industry, Mr Khullar said that telecom companies have not explained their stance. “Private parties have invariably couched their conclusions in terms of the impact on tariffs. It is not entirely clear how such analyses have been arrived,” TRAI said.

Dr Khullar told the EGoM that the operators’ profitability will improve even if the tariffs are increased by just 5 paise. “With just a 5 paise per minute increase in tariff, the EBITDA margins post impact (after spectrum pricing is implemented) are higher than in the base case for every year,” TRAI said.

In case operators increase tariffs by 10 paise, then the EBIDTA margins range between 20 per cent in 2012-13 and 49.8 per cent in 2031-32 compared to 6.5 per cent in 2012-13 and 40.6 per cent in 2031-32.

“The EBIDTA margins are higher in every year. To gauge the order of magnitude, the profit before income tax is generally as much as 36 per cent to 45 per cent higher than in the base case,” TRAI said.

On the impact of its proposal on Government revenues, TRAI said the exchequer could get as much as Rs 6.9 lakh crore over the next 20 years.

Operators refute analysis

Telecom companies refuted TRAI’s analysis, saying the regulator has changed its assumptions made in the earlier recommendations.

“TRAI’s analysis of the impact on tariff which has now increased from 4.4 paise to 15 paise is an acknowledgement of our earlier assessment that the impact on tariffs could be much higher,” said Mr Rajan Mathews, Director-General, Cellular Operators Association of India.

The operators pointed out that TRAI has changed its assumptions on the growth of total minutes in its bid to achieve a pre-defined conclusion.

“It increased the growth rates to 15 per cent, 14 per cent and 11 per cent, in the first three years as against its assumptions in the past paper, where it was assumed to be 10 per cent for the first three years. This change in assumption has led to a substantial decrease in rate per minute in the new analysis,” COAI said.

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Published on July 13, 2012
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