Bahrain sets telecom service capital cost at 9.5pc
Manama, March 13, 2013
Bahrain's telecom watchdog Telecommunications Regulatory Authority (TRA) has fixed the cost of capital for regulated telecommunications services in the Kingdom at 9.5 per cent, said a report.
In its final determination on the issue, the TRA yesterday said the cost of capital is a vital parameter that affects the cost base of operators and the price paid by consumers for telecoms services, reported the Gulf Daily News, our sister publication.
This represents the return that investors are able to earn on capital employed in the provision of regulated services in the kingdom, the report quoted a top TRA official as saying.
"Although the cost of capital is unchanged from the level set in 2009, a number of parameters upon which the cost is based have changed," explained TRA chairman Dr Mohammed Al Amer.
"We believe that the 9.5 per cent rate continues to provide the right investment incentives while preventing excessive profits. In reviewing the cost of capital, the regulator said it examined the changes that had occurred since the parameter was last set in 2009," he observed.
Other factors taken into consideration include, international best practices, latest available market information, regulatory precedents and the current economic environment, the official said.
The regulator further said it has been both cautious and conservative in its approach to determine 9.5 per cent to be fair and reasonable.
The rate fixed balances incentives to invest with regulatory stability and takes into account the ongoing current economic uncertainty.
"The cost of capital set will ensure that licensed operators who have been found to have significant market power or dominance will be appropriately compensated for the capital costs that they face when making such investments," Dr Al Amer said.
"This in turn will maintain incentives for efficient investment, and will allow regulated entities to continue to attract the capital required to underpin the development of the telecommunications sector," the chairman said.
TRA has also taken into account submissions received on the draft proposal issued on November 5, last year.-TradeArabia News Service