The head of India’s Department of Telecom (DoT) has explained that since the country’s mobile operators’ profits are healthy and their debt levels manageable, there is “no case at all” for any tariff increases.
Telecom secretary Rakesh Garg insisted that the industry, which is benefiting from soaring demand for data and improved spectrum efficiency, has the ability of cope with the “very marginal” cost increases due to their spectrum purchases, the Economic Times reported. He said profits and margins have been rising, particularly for the country’s larger operators.
His comments come just days after the outgoing chairman of the Telecom Regulatory Authority of India (TRAI), Rahul Khullar, said mobile rates need to increase by 12-15 per cent to make up for the latest round of investments in spectrum.
A month ago, the Cellular Operators Association of India (COAI) warned that the huge investment the country’s mobile operators need to make in spectrum will lead to higher tariffs for mobile services in the coming months.
The spectrum auctions, which closed on 25 March, have raised a record INR1.1 trillion ($17.6 billion) from eight operators.
Outgoing Vodafone India CEO, Martin Pieters, stated that the large sums doled out in India’s recent spectrum auctions would inevitably squeeze network investment.
COAI noted before last month’s auction that the country’s operators already had a combined debt of some INR2.5 trillion.
Garg, however, suggested that the industry’s fundamentals remain strong and it is “wrong to say that debt is crippling the Indian telecom industry”, the Times reported. Citing TRAI figures, he said the industry’s adjusted gross revenue rose 11 per cent year-on-year in Q3 last year.
Moody’s said last week that the recently concluded auctions are credit negative for the industry because it will increase operators’ debt and costs and reduce their ability to fund future expansion.