Spectrum allocation to Telecommunication companies to hamper their growth in the near future

Aggressive bidding in the telecommunication spectrum allocation hampered Telecommunication growth. TRAI estimates that to cover the losses and liquidity crises companies may have to increase their call rates by 6 to 7 paise per minute which is in contradiction to the figure provided by government that is 1.3 paise per minute. The prices of spectrum were higher than the price recommended by TRAI by an average of 20%. The difference in the calculations are arising as government has not considered cost of capital employed by such companies.

Government created a scenario which forced the companies to bid aggressively which resulted in:

1.      Fall in the operating margins for the ensuing fiscals.

2.      Non up gradation of infrastructure resulting in poor services to consumers as a consequence of liquidity crunch.

3.      Debt portfolio of Telecom companies to increase to over Rs 350,000 crores after auction.

4.      Telecom companies to introduce differential pricing for the use of internet, thus defeating the notion of freedom of media and speech by disrupting the concept of Internet Neutrality in the country.