Price rises in Indian telecom sector

Dear middle-class householder, is your monthly mobile bill twice as much as your electricity bill?

Ladies, is the handset you own, much costlier than most of the trinkets in your jewellery box?

Dear smartphone users, is your wi-fi bill just a fraction of your mobile data plan? 

Congratulations! We are soon going to rub shoulders with developed economies where mobile telephony is anything but cheap. And, the whole universe is conspiring towards it. The largest stakeholder of this change is the government itself. 

Many of us have been reminded of how call tariffs were at Rs 16 before the government moved to make it lower to make mobile telephony democratic, and how incoming calls were made cheaper. 

There is yet another story not told so often. There was no case for text messaging before mobile phones and many would still use it for calls. The operators had then stepped in to make SMS free. That’s how people started to text endlessly - it became a popular pastime. It also brought in a social behaviour of passing on a message, by avoiding a talk with someone. Very soon, SMS became paid and expensive but never lost its sheen because of the aforementioned advantage. Now of course, SMS is identified as an app where bank transaction details and operator push messages are received. 

That’s what has happened with data too. The operators laid a bait with cheap 3G plans. They have now spread and became a part of the smartphone usage pattern. The gap between data usage charges and call charges is fast closing. Here, the ever-increasing apps and their usage is a major contributor too. 

These are the some of the many reasons why mobile rates will continue to go up from now, irrespective of the government’s seemingly high rates for spectrum in the upcoming 2G and 3G auctions. Though much higher than the regulator’s recommendations, spectrum charges mostly mirror the prices at which the operators bid for the last spectrum. As the 2010 3G auctions were fiercely bid, they had upped the ante. Yet, setting the base price for 3G at Rs 3,705 crore, which is 36 percent higher than the suggestion by the Telecom Regulatory Authority of India (TRAI) is steep, claim many analysts. 

Base prices set for the 2G auction are no less either at Rs 3,646 crore pan-India per megahertz in 800 MHz, Rs 3,980 crore for 900 MHz band across pan except Delhi, Mumbai, Kolkata, and J&K. The base bid price is fixed at Rs 2,191 crore pan-India (except Maharashtra and West Bengal) in the 1800 MHz band. The government is not letting the operators get off cheap. Much earlier, when spectrum was cheaper, spectrum costs used to account to less than five percent of total costs, now they are hovering at 10-11 per cent, and only expected to go up. This points out to only one thing — government giveth, government taketh away. Telecom is more democratic now, an objective they have achieved, and freedom is costly. 

The operators on the other hand, have just started reaping benefits of increased data usage. Recently, Vodafone India reported a 70 percent increase in their mobile Internet revenue. The others have been seeing similar results. That’s both good and bad news. It means they have a new form of revenue in an almost-saturated market. But, it also means that companies will have to spend more towards enhancing 3G network as more and more people surf more and start ‘depending’ on 3G networks. They will soon load the networks, and 3G will also have to be made available even in remote areas. Operators will have to spend more on network coverage. They will also have to fill in the gaps in circles where they have no 3G licences. It means they have to bid in the upcoming expensive auction. Players like Uninor too might join the fray as they had completely ignored 3G earlier, which few can now afford to do, slightly increasing the competition.  

Operators have more to spend in order to earn more. They are still offering data services at rates which are not commensurate to their spending on this new technology. If they are buying more 3G at higher rates, users need to expect higher prices. All the Indian operators are also burdened by huge debts on their balance sheets. Users will have to pay more. They can complain, but not question as they too have few options. Landlines are almost non-existent. STB booths are extinct. Call rates are expected to rise too. 

The hero of Gone With The Wind, Rhett Butler would have said, “There is as much money to made during peace as much as there was during war.” Telephone companies can name their price. And no one sure gives a damn.  

Katya B Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities.