Capital cost for telecom services set at 9.5pc [Gulf Daily News (Bahrain)]
(Gulf Daily News (Bahrain) Via Acquire Media NewsEdge) MANAMA: The cost of capital for regulated telecommunications services has been fixed at 9.5 per cent by the telecom watchdog.
In its final determination on the issue, the Telecommunications Regulatory Authority (TRA) yesterday said the cost of capital is an important parameter that affects the cost base of operators and the price paid by consumers for telecommunications services.
This represents the return that investors are able to earn on capital employed in the provision of regulated services in the kingdom, the TRA said.
In reviewing the cost of capital, the regulator said it examined the changes that had occurred since the parameter was last set in 2009.
Other factors taken into consideration include, international best practices, latest available market information, regulatory precedents and the current economic environment, the TRA said.
The regulator further said it has been both cautious and conservative in its approach to determine 9.5pc to be fair and reasonable.
The rate fixed balances incentives to invest with regulatory stability and takes into account the ongoing current economic uncertainty.
"Although the cost of capital is unchanged from the level set in 2009, a number of parameters upon which the cost is based have changed," TRA chairman Dr Mohammed Al Amer said.
"We believe that the 9.5pc rate continues to provide the right investment incentives while preventing excessive profits.
"The cost of capital set will ensure that licensed operators who have been found to have significant market power or dominance will be appropriately compensated for the capital costs that they face when making such investments," Dr Al Amer said.
"This in turn will maintain incentives for efficient investment, and will allow regulated entities to continue to attract the capital required to underpin the development of the telecommunications sector," the chairman said.
TRA has also taken into account submissions received on the draft proposal issued on November 5, last year.
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