Industry sources do not rule out upward revision of tariff

The biggest impact of Thursday's Supreme Court verdict quashing 122 telecom licences issued to a clutch of 2G mobile operators is likely to be felt in nearly half a dozen telecom circles across the country.

While back-of-the-envelope calculations indicate that the cancellation of licences could affect in excess of 75 million mobile users across the country —many of whom are subscribers of new telecom players who have landed in trouble — the fallout would be most acute in circles such as Maharashtra, including Mumbai, Uttar Pradesh (East), Uttar Pradesh (W) and Gujarat, and to a lesser extent in Tamil Nadu, Karnataka and Andhra Pradesh where these players had rolled out services.

The apex court on Thursday, while cancelling the licences allotted on or after January 10, 2008 to 11 companies during the tenure of the former telecom minister, A. Raja, had stated that the order would be operational only after four months.

It mandated the Telecom Regulatory Authority of India (TRAI) TRAI to make fresh recommendations on allotment of the licenses within two months, based on which the Centre would take an appropriate decision within the next one month, and fresh licences be granted by auction.

The licences cancelled include 21 of Videocon, 22 of Unitech Wireless Ltd (Uninor), nine of Idea, 21 of Loop, six of S-Tel, 21 of Sistema, three of Tata, 13 of Swan and two of Allianz.

According to industry sources, should the telecom operators who lost the licences fail at (or opt out of) the fresh auctions for 2G spectrum, the fallout could play out in the form of a consolidation in the market in favour of established players and a possible upward revision of call tariffs. It is pointed out that mobile tariffs had bottomed out — putting immense pressure on the Average Revenue Per User margins — because of the killer rates offered by new entrants and the exit of this segment would see a return of more realistic call costing in the industry.

Healthy competition

When contacted, R.K. Upadhyay, Chairman and Managing Director of BSNL, doubted whether Mobile Number Portability (MNP) would be a relevant mechanism for mobile users in this particular context. “My preliminary impression is that MNP is not relevant in a setting where a telecom player is scrapped of its licence. Basically, operationalising the MNP also involves using the equipment of the telecom operator from whose network a user is seeking to port out. If the company ceases to exist then users can only take a new connection from an operator of their choice,” he said.

On whether a churn of such large numbers of mobile users would constrain the capacity of networks, he said capacity constraint was not an issue for a deep-entrenched operator like the BSNL should there be any largescale in-bound migration to its network.

According to him, the fallout could have an impact on tariff structuring in the industry. “We are likely to see a return to healthy competition and to a pricing regime that is realistic and sustainable for the industry,” the BSNL CMD said. Meanwhile, TRAI has, in response to the Supreme Court's bidding, floated a pre-consultation note on Friday — titled “Allocation of Spectrum in 2G band in 22 Service Areas by auction” — inviting written comments from stakeholders by February 15.