Tele-density Targets Could Go Haywire With High Tariffs: PwC

New Delhi: | Updated: Feb 27 2003, 05:30am hrs
In what could have significant implications for telecom companies and investors, the country might not be able to achieve the targeted tele-density of 15 households in 100 by the year 2010 according to a study by PricewaterhouseCoopers (PwC). The analysis is based on household affordability at various monthly bill levels, expected to go up as cross-subsidisation goes down.

A tele-density of 15 implies connections in 175 million households, with urban and rural areas accounting for 142 million and 33 million respectively. The current national tele-density is 4.4. At present, the average density levels in the four leading metros is 20, for state capitals it is 10 and for rural areas it is 1.1.

In a discussion with eFE, PwC partner (telecom) Usha Rajeev said the report is based on some assumptions. Households in urban and rural areas are expected to spend 3 per cent and 1.75 per cent of their income on telecom respectively.

Further, a Telecom Regulatory Authority of India paper on tariffs for basic services has been referred to showing rentals and local call charges are currently significantly cross-subsidised by long distance calls. But such subsidies are going down fast as long distance tariffs fall and the market becomes deregulated and competitive for all including the incumbent players. One could thus witness bills rising in the future.

The study has analysed household affordability at various monthly telecom spend levels. In the urban areas, for a monthly bill of up to Rs 220, the penetration is seen at 61 per cent, or 36 million households. This drops to 38 per cent, or 22 million households, for a bill of Rs 330, dropping further down to half this level if the bill goes up to Rs 440. At a level of Rs 1560 only one million, or two per cent overall, of households are seen able to afford a telephone connection.

Extrapolating this data further for an average monthly spend of Rs 330, 71 million urban households are being seen to be able to afford a telephone connection in 2010, implying a gap of 71 million from the target of a market of 142 million that year.

Likewise for the rural areas, 31 million households or 24 per cent overall are seen to be able to afford telephony with a monthly bill of Rs 130. This drops to just six million households for a bill of Rs 260, and 0.5 million households at Rs 910. At Rs 260, a shortfall of 14 million households is expected from the target of 33 million in 2010.

According to Ms Rajeev, there is as yet no panacea for meeting the telecom target objectives and reducing geographical disparities in access to telecom.

It could be a combination of lowering of licence and spectrum fee, cheaper technologies and a more effective utilisation of resources including sharing of infrastructure by competitors. The government and the regulators could also play a key role in encouraging

cooperation.