Mobile tariffs are unlikely to rise in the near future: DoT

The Department of Telecom said mobile tariffs are unlikely to rise in the near future as a result of the recently concluded spectrum auction because competition will restrain operators from hiking rates.

"As a policy maker, I think the tariffs should hold. I am not the operator, nor I am the regulator, but I am saying that there are two elements here and these elements will actually act together to restrain any increase in tariffs," Telecom Secretary MF Farooqui said at the Mobile World Congress in Barcelona.

He said on the one hand, competition will restrain operators from increasing tariffs and on the other, new technology would allow them to lower costs and offer a wider range of services.

"One element is competition. So, competition will hold back any operator from doing anything which is going to reduce his market share. So, I think that is going to be one big restraining factor and the second thing is the technology which exists in the market that allows many other services to gradually be loaded on," he said.

Eight telecom companies, including Bharti Airtel, Vodafone and Idea Cellular, the biggest three in the country, bid a combined Rs. 61,162 crores in the spectrum auction held earlier this month. The government offered airwaves in the 1800MHz and 900MHz bands.

(Also see: Spectrum auction: The complete list of winners)

Telecom operators have been cutting back on freebies and discounted minutes to maintain profitability and have been saying that the mobile industry needs annual tariff increases to sustain themselves.

"We have had declining tariffs for 18 years; this cannot be sustained forever. We believe the point has come where we will have to increase our tariffs every year, depending on cost levels," Vodafone India Managing Director and Chief Executive Officer Marten Pieters said recently.

Pieters said the industry has not yet recovered from the excesses of the 2010 auction and the February auction, combined with others expected in the next couple of years, will worsen the industry's health.

However, Farooqui said the operators are not required to pay the full amount bid for spectrum in one go.

"Let's not forget that we are not asking for down-payment," he said. Operators can make part-payment now and the rest over a period of time, he said.

Winners of spectrum can make a partial upfront payment by March 3 and pay the rest in 10 yearly instalments. If the bidders opt for deferred payments, the government will get about Rs. 18,296 crores in this financial year.