The new measures proposed by the Telecom Regulatory Authority of India (TRAI) saw telecom shares coming under intense selling pressure in trade today. Bharti Airtel was down almost 6%, Idea Cellular was down 7% and RCom was down 2.58%.
The TRAI has recommended measures that analysts believe would reduce the already wafer thin margins, and adversely affect companies in the sector.
TRAI has recommended that the auction of 5 megahertz (MHz) of spectrum in the 1,800MHz band should be at total price of Rs. 3,622 crore per MHz across the country. This comes to a total reserve price of as much as Rs. 18,110.9 crore for the full 5MHz that’s needed to start mobile telephony services.
It further suggested a pan-India reserve price of Rs. 7,244.36 per MHz in the 800/900Mhz band, and Rs. 14,488.72 per MHz in the 700MHz band needed for 4G services.
Analysts and marketmen believe that the prices are steep and the companies may have to increase tariffs to stay competitive in the business, if the recommendations are accepted. Companies in the space are reeling under heavy debt and low margins, due to cut throat competition.