CIOIN

The Supreme Court’s decision to canceled 122 mobile-telecom-service licenses issued without auction in 2008, is going to have a direct impact on the end consumers’ phone bill, analysts believe.

While the Supreme Court asked telecom regulator TRAI to make fresh recommendations on the allotment of the licenses within four months, TRAI chief J.S. Sarma has said that the new licenses will now be allotted through an auction in the open market--not on the "first-come-first-served" policy that the government followed.

The Supreme Court has also levied a fine of Rs 5 crore each on Uninor, Swan Telecom and Tata Tele and Rs 50 lakh each on Loop, S-Tel, Allianz and Sistema Shyam. The companies who want to stay in business might pass on these extra costs of compliance directly on the consumers.

“Tariff hikes have been on cards for some time now, as telcos have been reeling under debts borne out of the 3G auctions. Even though tariff hiked of up to 20 percent were affected last year, that has made little impact in an inflationary economy where GDP has also been revised downwards,” says Deepak Kumar, research director, Telecommunication, IDC, India.

Most of these companies have been reeling under losses in the past.

“Any additional costs for airwaves are going to be passed on to consumers, as the industry is not in a position to absorb those,” says Kumar

Kamlesh Bhatia, research director, Gartner, believes that this decision is going to trigger long-awaited consolidation in the telecom industry. He believes that the companies that have been hit are marginal players who will either have to exit from the market or merge with larger players to stay afloat.

“What this will essentially do—and consolidation always does that—is to put the power of pricing back into the hands of the bigger players. I would expect pricing to move up,” says Bhatia.

The Supreme Court verdict said the current licenses will remain in place for four months, during which the government should decide fresh norms for issuing licenses. This would mean that the affected companies would have four months to decide whether they would like to stay in the game or exit.

Here’s the catch: Customers who need to move—because their provider goes out of business--will require three month to change providers, under the MNP. So potentially, if a service provider does not decide whether it wants to stay in business within the next month, its customers could find themselves without service.

 “There is currently some confusion over what would be the course of action for both companies and the government,” says Rajan S Mathews, director general, Cellular Operators Association of India “Companies who intend to stay in the market would need more clarity from government on the eligibility criterions for the new auction and companies that want to exit would need new policies from TRAI.”

Kumar doesn’t think of it as huge problem “From a timeline perspective that should not be a problem,” he says.

Here hoping that the end consumers don’t end up paying a heavy penalty amidst all this indecisiveness between the Supreme Court, government, TRAI and telecom providers.