The telecom regulator could take at least six more months to decide on a floor price for tariffs.
The telecom regulator could take at least six months to decide on a floor price for tariffs as it seeks to arrive at a level that will help the phone companies regain financial health but won’t be regarded as anti-consumer, said people with knowledge of the matter.
The divergence in the cost data submitted by Reliance Jio Infocomm, Bharti AirtelNSE 1.69 % and Vodafone Idea adds to complications. There’s a difference of `12 in the prices quoted for one GB of data and a one-minute voice call.
“The floor price, if at all fixed by Trai (Telecom Regulatory Authority of India), is unlikely to kick in before June next year,” said one of the persons.
Prodded by the sector and the government to come up with a floor price, Trai recently floated a consultation paper seeking the views of stakeholders. It has asked whether such a limit needs to be fixed and how by seeking data on costs. The intent is to arrive at a number that factors in a margin over the cost that can help telcos financially.
Trai has also asked whether there should be a corresponding cap on tariffs if it fixes a floor price.
With the companies having increased charges recently, they will have to pass on revised numbers.
All three telecom companies… will now be updating (the data) since they recently raised tariffs and the impact of that rise on overall usage and cost of producing one unit of voice and data will be shared with Trai,” said one of the persons. Among the submissions that of Jio’s is the lowest and Vodafone Idea’s the highest.
“Cost per unit of data (GB) plus voice (minute) for Jio is about Rs 10, for Airtel is Rs 16 and for Vodafone Idea, it is the highest at Rs 22,” said one of the persons.
“The updated data which will be submitted by telecom companies to the regulator in response to the consultation paper could be even higher.”
The variance means the regulator will need to decide which price to use as a reference.
“If it’s the lowest cost, then it still doesn’t help an operator such as Vodafone Idea,” the person said. “And, if the highest cost is fixed as the base, then a margin on top of that could increase the tariffs very steeply. This would in fact give a huge margin to the player producing at the lowest cost, who can then again disrupt the market.”
Bharti Airtel chairman Sunil Mittal said recently that telecom tariffs need to go up to at least Rs 300 per person per month to restore the telecom sector’s viability and that Trai needs to intervene in this regard.
The person cited above said the regulator needs a scientific basis to fix the floor price and using a Rs 300 bill as a starting point won’t work. “That cannot be the starting point,” he said.
The three phone companies didn’t respond to emails seeking comment.
Stakeholders have to submit comments on the Trai paper by January 17 and counter comments by January 31.
The consultation paper comes as the government has stepped in to help revive the indebted telecom sector that faces hefty dues following a Supreme Court judgment in October.
It has announced a two-year moratorium on payment of spectrum dues, is considering a cut in the licence fee and is referring the matter of Rs 37,000-crore input tax credit lying with it to the GST Council.
Price wars since the entry of Jio in September 2016 have left the latter as the only telco making profit and forced others to exit or consolidate.
