Steep spectrum price recommended; tariff may rise; companies slam TRAI

TRAI has recommended base price of Rs3,622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the telecom minister

New Delhi: The Telecom Regulatory Authority of India (TRAI) proposed a steep minimum price for auction of 2G telecom spectrum, setting off fears of a hike in mobile phone tariffs which are at present among the cheapest in the world, reports PTI.

TRAI recommended base price of Rs3,622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the telecom minister.

According to TRAI recommendations, a minimum of 5 Mhz should be allotted which would mean that a pan-India spectrum in 1800 MHz band will cost Rs18,000 crore. The reserve price is five times the base price of Rs3,500 crore for 3G auction.

Operators slammed the recommendations saying they are “arbitrary, regressive and inconsistent” and will hurt further investment in the sector and expansion in rural areas.

New operator Uninor whose licences has been cancelled by the Supreme Court, said, “... some of these recommendations will create severe negative impact on the entire industry. It is up to the political leadership of India to now ensure that gains of the past few years of affordable phone calls for India's people are not undone.”

“The industry was looking forward to reasonable spectrum reserve price recommendations from TRAI in the light of the government’s own articulated policy directions on affordability and rural penetration,” telecom associations COAI and AUSPI said in joint statement.

TRAI chairman JS Sarma said the recommendations should not lead to a hike in tariff and if warranted take necessary action will be taken. “We have already issued consultation paper on forbearance of tariff,” he added.

When asked Mr Sarma said, “Auction is open for all.”

Telecom secretary R Chandrashekhar said the industry should not look at just the initial price. There are many relaxations too, he added

“TRAI has relaxed payment condition. Only 33% payment has to be made on winning of spectrum initially. Rest of the payments has to be made over years. Also TRAI has relaxed spectrum usage charge to 1% which ranges between 3% and 8%,” Mr Chandrashekhar said.


TCS clocks $10 billion; targets outdoing Nasscom FY13 revenue growth

TCS has become the first Indian IT company to cross the ten billion dollar milestone posting annual revenues of $10.17 billion in 2011-12

Mumbai: India’s largest software exporter TCS (Tata Consultancy Services) posted a healthy 21.9% rise in net profit for 2011-12 at Rs10,638.2 crore and said it is on track to outperform the industry revenue growth of 11%-14% set by industry body Nasscom for 2012-13, reports PTI.

The company also became the first Indian IT company to cross the ten billion dollar milestone posting annual revenues of $10.17 billion in 2011-12.

The IT major said its net profit for the fourth quarter of the last fiscal rose by 22.6% to Rs2,932.4 crore on the back of a 30.5% rise in revenues at Rs13,259.3 crore.

Analysts said TCS performance was particularly encouraging in a challenging environment. It follows bellwether Infosys’ rather poor show wherein it missed its own revenue guidance for the March quarter and gave a muted 8%-10% guidance that had dampened investor sentiment.

Unveiling the numbers, TCS CEO and MD N Chandrasekaran said: “Our order book is very healthy. We don’t give numbers; it continues to see improvement... Our intention is to remain ahead of the Nasscom target for 2013.”

Buoyed by good momentum, TCS said it will hire 50,000 people in FY 12-13 and will also raise wages for its existing employees in India by 8%.

In contrast, Infosys had said wages would be frozen till there was more clarity on the economic environment.

HCL Technologies, fourth in the tally, reported 29% increase in net profit, while Wipro will report its March-quarter earnings on 25 March 2012.

Mr Chandrasekaran said the company has carried its strong momentum through the fourth quarter to close out a year of strong growth.

“We have kept our focus on profitability and consolidated our market leadership. North America and UK delivered excellent growth while Europe grew by 40%. However, Indian market continued to be volatile,” he said.

With the customers’ IT budgets almost flat, there is expected to be further pressure on Indian software service vendors, who are facing stiff competition from global giants like IBM and Accenture.

“TCS is well prepared to achieve balanced growth across the industries and markets it operates in, given its holistic portfolio of services which are now achieving significant scale across markets,” Mr Chandrasekaran said.

Kotak Securities head of fundamental research Dipen Shah said TCS results were in line with estimates on revenue and profit front.

“The 3.3% volume growth was encouraging in a tough macro environment. Management is also pretty confident of growing above the Nasscom average growth rate for FY12-13,” Mr Shah added.

TCS posted revenues of Rs48,893.8 crore ($10.17 billion) in 2011-12, up 31% as compared to Rs37,324.5 crore in 2010-11.

“We have grown very well during 2011-12 and also been able to exit the year at the right margin levels, despite the marked increase in volatility during the past 12 months,” TCS chief financial officer and executive director S Mahalingam said.

He added the company remains focussed on opportunities in the market. “So, while maintaining our cost discipline at an operational level, we continue to invest in capacity and capability as we prepare for growth ahead,” Mr Mahalingam said.

During the January-March quarter, the company made a net addition of 11,832 employees, taking its total headcount to over 2.38 lakh.

The company has recommended a final dividend and a special dividend of Rs8 each per equity share of Re1.


Personal Finance Exclusive
Does your car and bike insurance premium subsidise the fat cats?

IRDA has increased premiums for automobile insurance with effect from 1 April 2012. Insurance companies have come up with a new trick of using only the engine cubic capacity. The smaller and cheaper cars and bikes are subsidising the bigger and costlier ones

Insurance regulator, Insurance Regulatory and Development Authority (IRDA) has increased premiums for automobile insurance with effect from 1 April 2012. We see all sorts of new calculations on the scribble sheet that often accompanies the proposal which is also found on the cover note as well as the policy. The net result is that in some cases you can anticipate an increase of almost 50% over what you paid last year for the same vehicle, especially if it is a smaller car or a two-wheeler.

Of course, another truth is that the value of your car or bike is also going to depreciate faster. So with a lower cover, the premium amount also comes down for an existing vehicle—though that is cold comfort in case anything does happen to your wheels. However, in an attempt to see that they continue to collect as much as they can from you without increasing the coverage, the insurance companies appear to have come up with a new trick.

Take a closer look at the way the compulsory Third Party Risk and insurance premium is now calculated. Here are the details, and in all cases, taxes and other surcharges extra at actuals:

Private Cars:

< 1000 cc             =    Rs784.00

1000cc - 1500cc =    Rs925.00

>1500cc               =    Rs2,853.00

Private two- wheelers:

<   75cc                 =  Rs350.00

75cc - 150cc         =  Rs 357.00

150cc - 350cc       =  Rs355.00

>350cc               =  Rs 680.00


Is this fair? I discussed this with a very senior person in the insurance industry in India, who has been in the business for over three decades been working in the public sector and knows the subject. Here’s a quick re-cap:

# There appears to be no differential rate for private cars registered and used by private individuals and private cars registered and used by government, corporates and companies. The presence on road, distance covered and therefore potential for causing damage to other road users is so much higher in these two categories, and has not been provided for.

# Third Party risk is basis the damage your vehicle can cause. A more powerful vehicle shall cause more damage and the premium should be much higher—preferably in terms of a composite of horsepower generated, maximum all-up gross weight and value. Using only the engine cubic capacity alone is a flawed method.

# As a result of using only the engine cubic capacity, it is clear that the smaller and cheaper cars and bikes are subsidising the bigger and costlier ones. A typical < 1000cc car would cost around Rs3-Rs4 lakh while the price of a >1500cc car would range from Rs8-Rs10 lakh all the way up to Rs3-Rs5 crore. That huge Audi Q7 or Mercedes Benz E Class or BMW 5 series will cost only 4-5 times more to insure for Third Party insurance while costing 50 times or more—and let’s not even talk about the Rolls Royce or Bentley or Aston Martin which would cost 200 times more than the Tata Nano.

# Goods vehicles are categorised and charged as per their maximum gross vehicle weight, which is also not totally correct, but is a far better way than going only by cubic capacity. Likewise, cars, three-wheelers and bikes used for carrying passengers have another formula, which also brings in the number of passengers to be carried and therefore covered.

The best co-relation that this person from the insurance industry gave went something like this: An additional cost of Rs5 is levied on the pao-vade that people eat at Dadar for Rs10, so that the person eating a full meal at a 5-star hotel has to pay only Rs50 for the Rs2000 bill—and entry to the 5-star is permitted only to those who drive up in a car costing over Rs20 lakh.

(Veeresh Malik had a long career in the Merchant Navy, which he left in 1983. He has qualifications in ship-broking and chartering, loves to travel, and has been in print and electronic media for over two decades. After starting and selling a couple of companies, is now back to his first love—writing.)





5 years ago

this just exposes our incompetence in the actuarial science field. god bless our education system & our financial industry.

i have an old contessa with 1800cc. is it possible for me to downgrade the engine capacity to avoid the penalty???



In Reply to param 5 years ago

Dear Param - it is much deeper than actuarial science, it is a complete scam to promote the reduction of running costs for expensive vehicles.

On your Contessa with the 1800cc Isuzu engine (I presume), if you don't use it for long out-station runs, you may wish to consider converting it to battery driven, since this is one of the few cars left with a ladder chassis that will take the weight and other aspects. This is going to require technical skill-sets which are still not easily available, so may not be feasible right now. You can then park a genset in the boot, declare the vehicle as a zero-cc electric engine, and see what the insurance companies have to say.

But on a more serious current time line basis, yes Sir, it does appear to me that with a street value of around 30-50k, your 3rd party insurance on engine cc basis alone will be close to 3000/oo rupees. Which is the same amount as is paid by a person who owns a brand new super car costing 3 crores. Your car provides yet another classic example of the way the odds are being stacked against the aspiring middle class.



In Reply to malq 5 years ago

Thanks Veeresh. A mechanic has suggested converting to LPG, but I don't feel safe yet. Will have to ask about the electric conversion, I had thought the weight is too much to handle that. I have noted that in such cases, insurance companies put you in 'difficult customer' category & simply don't give you a quote...

finally, the 3rd party insurance is to cover the damage you may inflict on others. i don't understand how it related to CC or cost of the car. the most important factor is the driver knowledge, experience, how much one drives, where one drives, etc. unfortunately slicing/dicing on these needs good actuarial skills, which we are happy to avoid & go for simple maths. why pay for underwriters at all?

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