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Telecom firms may cut freebies, discounts after 2G auction

Saturday, 15 February 2014 - 6:00am IST | Place: New Delhi | Agency: DNA
May not go for immediate tariff hike

Though telecom players are required to make an upfront payment of Rs 18,296 crore for acquiring 2G spectrum they are unlikely to burden users with immediate tariff hikes.

The companies would first study the market dynamics before taking tariff hike call, but discounts and freebies may be reduced, industry sources said.

A senior executive with one of the telcos which bought spectrum at the auction that concluded on Thursday, told dna that the company will wait for the spectrum to come, analyse what the input cost turns out to be and then take a call.

The companies will deal with the situation smartly by cutting freebies and discounts.

"There is still a scope of reducing free minute usage and freebies, it will be a pull-based strategy. But that's not going to happen overnight and would take some time," an executive with another firm said.
The top four bidders -- Vodafone, Bharti Airtel, Reliance Jio Infocomm and Idea Cellular -- bid for the majority of the total money of Rs 61,162 crore assured to the exchequer.

The tariffs may also not go up immediately as the industry is under less stress due to Reliance Jio strategically bidding only in the 1800 MHz band.

The firm has made it clearer that it is not looking to do traditional 2G or 3G service but more of 4G. It has taken up contiguous blocks -- series of blocks that is compatible with its 2300 MHz band.

The firm has acquired spectrum in 14 key circles in the 1800 MHz band

"RJIL plans to use this spectrum in conjunction with its pan India 2300 MHz spectrum to address the expected surge in demand for digital services as well as to enhance in-building coverage. RJIL plans to provide seamless 4G services using FDD-LTE on 1800 MHz and TDD-LTE on 2300 MHz through an integrated ecosystem," the company said in a statement.

Reliance will have to shell out Rs 11,054 crore for this spectrum.

As a result, incumbents will not be pressurised, but they will still analyse the market scenario whether they can take a 20% sort of hike.

"There will not be any headline tariff hike. All that they will aim at is further pulling out discounts from the market," an analyst said.

The prices that have been discovered in the auction are well within the means of the players. All of them have bid very reasonably unlike what they had done in the 3G and BWA auctions. For Airtel and Vodafone, though it was a question of existence in terms of winning back 900 MHz spectrum, the cost of the bandwidth has risen a little beyond what was expected," another analyst said.

Hemant Joshi, partner, Deloitte Haskins & Sells, a consultant firm, said, "Given the tough competition among the incumbents increase in tariff may be a challenge, it is difficult but not unlikely. However, it will be gradual. The discounts may be withdrawn depending on the market dynamics," he said.

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