Tariff wars in telecom highly unlikely

New Delhi: The four-year breather from payment of regulatory dues offered as part of the telecom relief package allows operators time to transform and repair, and may cool off price wars, according to a senior analyst at Deloitte India.

The reforms send out a strong message to the global community and are expected to bolster confidence of investors and lenders in the telecom sector, PeeyushVaish, Partner and Telecom Sector Leader, Deloitte India said.

The Union Cabinet recently approved a blockbuster relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea Ltd (VIL) that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of Spectrum usage charge (SUC) for airwaves acquired in future spectrum auctions."The four-year timeframe is good enough period to sort out industry's issues on pricing," Vaish said. Operators have four years to transform themselves, which is significant. Players are competent enough to transform themselves, he said.

"I expect that all operators will be able to sort out their costs and margins, over the next four years," he added. Telcos will 'shape up' in coming years, and go in for course correction, where needed. "Total of four-year moratorium means, about three years post 5G launch and that is a good enough period for any organisation to transform, restructure and come out of current challenges," he further added.

Telecom Minister Ashwini Vaishnaw recently said the 5G spectrum auctions will 'most probably' be held in February 2022, and the government may even try for a January timeline. Deloitte's Vaish believes that the slew of reform related announcements have now significantly lessened the chances of duopoly in the market and price wars are expected to subside with telcos likely to train their sights on profitability and margins.