In its consultation paper, Trai has pointed out that Indian operators are earning much higher profit margins (EBITDA margins) and return on capital employed (ROCE) than operators in many other countries. Even with a reduction of tariff in recent years, EBIDTA margins of listed Indian telecom operators have increased from 34 per cent to 40 per cent. Indian telecom operators also have the highest valuations in the world.

The Competition Commission, too, had opposed putting a cap on the number of operators. In a letter to the regulator, Competition Commission member Vinod Dhall had said that some of the issues in the consultation paper were at variance with the Competition Act 2002.

“The consultation paper, in a number of places, makes mention of certain thrusholds or caps such as 67 per cent marketshare, a cap on the number of service providers in a service area, and a minimum of three service providers in an area. In light of the provisions of the Competition Act and the current state of telecom markets, it is not clear whether such thresholds/ caps are relevant,” noted Dhall.

Experts also feel that instead of restricting competition in telecom services, the government should focus on spectrum management. Quick induction of 3G services in 2.1 GHz and 450 MHz to temporarily relieve pressure on the 800-900 MHz and 1,800 MHz, WiMax services in the 3.3 and 3.5 GHz ranges, incentivising the use of fixed-mobile convergence for picking up in-building traffic on optic fibre cables, and greater deployment of in-building low power BTSs are some of the ways for better spectrum management.

... contd.