Telecom tariffs may come down with new players in mkt

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The stage is set for 4 more players to join the Indian telecom landscape. The DoT has issued letters of intent to all eligible applicants who had applied on or before the 25th of September.

Experts say that there will be two distinct advantages of more players coming into the telecom sector. One, the telecom tariffs are likely to come down and that is because new players will have to woo customers and also because the infrastructure costs for these new players will also be much lower since they will not have to set up everything from scratch. They can lease it from the infrastructure companies that are being formed by current telecom companies and that could be a substantial saving.

Also, experts say it would improve penetration because the new companies would like to go into tier-II and tier-III cities where penetration is still lower rather than go to the metros, which are anyway over 50% penetrated. So, it would increase the reach of mobile telephony.

On the flipside of course, they say that the margins in this sector may come down substantially. Currently, telecom companies enjoy 40-50% margin. These could come down with new players coming in. Also, with the new lot of subscribers coming in from the lower income group, the revenues may take a little bit of beating. Also, of course, since spectrum is scarce, there could be a spectrum crunch with 8 players already vying and 4 more coming into the fray, the quality of service could suffer substantially.