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Bharti Airtel, Vodafone will Feel the Pinch from New $5.7B Surcharge in India

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November 08, 2012

Bharti Airtel, Vodafone will Feel the Pinch from New $5.7B Surcharge in India

By Ed Silverstein, TMCnet Contributor

Bharti Airtel (News - Alert) and Vodafone will be among the most seriously impacted by a new $5.7 billion surcharge on mobile airwaves in India, according to news reports.

As it now stands, Bharti Airtel may pay about $1 billion in surcharges and Vodafone (News - Alert) India may pay about $550 million, Reuters  said.

In addition to these two companies, two state-run carriers – identified as Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd – will also be impacted by the surcharge, Reuters (News - Alert) reported.

The surcharges try to level the “playing field between old and new operators,” Reuters added.

It is likely that the large telecoms may try to get the surcharges reduced.

"Telcos can now litigate and demand to reduce the fee,” one industry analyst told Reuters. “But at least the worst case on spectrum fees is now known."

The surcharges will lead to the government raising a net $5.72 billion. It comes at a time when India is trying to deal with a large deficit.

In other news about India’s telecom sector, Sanjay Kapoor, Bharti Airtel CEO for India and South Asia, said the sector will likely need to raise tariffs, according to the Times of India.

"The current tariffs do not even cover marginal costs for most operators. So from an economics perspective, do we need to increase prices? The answer is yes," Kapoor said during a break in programs being offered during the World Economic Forum on India. “The need for a price hike is more than accepted by me and by my colleagues in the industry."

In a related matter, TMCnet reported that India’s spectrum auctions are likely to start on Nov. 12. Companies will bid for airwaves in the 1800 MHz band. That is often employed by GSM-based mobile services.

Then, the country will hold CDMA spectrum auctions in the 800 MHz band. The CDMA auction could be delayed because two of bidders withdrew from the auction.

Edited by Brooke Neuman

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