Last month TRAI recommended astounding Reserve Price for Telecom Spectrum Auction. DoT has sought clarification on the same before coming with the final proposal. Meanwhile, Telecom Operators are sparing no efforts to bring down the Reserve Price of Spectrum and threatening that a call tariff hike upto 100% maybe required to fund the spectrum fees burden. Telecs sure are blowing it out of proportion, but lowering the Reserve Price will be a Prudent step for progressive auction, in my view.
Well, TRAI wants to Maximize Revenue for the State while Telecom Operators wants healthy bottom-line. TRAI defended its recommendation that small tariff hike can take care of the additional burden arising out of buying Spectrum in Auction.
So what is the actual Tariff Hike that maybe necessary to off-set the higher spectrum charges ? In my study, hikes would vary from circle to circle and the overall increase is likely to be in the 30-35% band over a period of time as Telcos get deferred payment option with the assumption of spectrum is sold at reserve price, embedded growth of Telcos, etc . In another school of thought, Citi Analyst thinks that a YoY tariff Hike of 3% can help Airtel offset the additional spectrum fees. For Idea Cellular it could be a little higher than Airtel. Now compare this hike to Long Term rate of Inflation in India 5%, so tariff hike of just half of annualized rate of Inflation can be absorbed, in my view 🙂
Finally, I wish the reserve price goes down a bit – TRAI cannot strictly stick to the rule of last winning price be the reserve price for following auction, as their can be several influencing factors, such as little spectrum put to auction, etc. We’ll have clarity soon as by June-20th the Auctioneer will be finalized and it”ll likely be done by end of August.