Tuesday, 24 October, 2017

Airtel slams Trai for slashing termination rate, hints at Jio

Telecom operators to seek legal help against TRAI's IUC slashing TRAI announces drop in Interconnection Usage Charge (IUC)
Garry Little | 21 September, 2017, 00:36

So the operators that have been charging for voice calls will now witness an impact on EBITDA margins as IUC charges drop from next month. Jio had to pay 21 billion rupees (US$326 million) in interconnect fees in the quarter ended June 30, according to the Morgan Stanley note dated Sept 20.

Under Bill and Keep regime, the operators only keep record of incoming calls on their network, but do not raise any demand from other operators. We are the ones investing in setting up data pipes and they make the money. The tariffs of telecom operators are based on data usage.

Financially, this is a big gain for Jio, as previous estimates predicted that if IUC is reduced to 6 paisa per minute, then Jio will gain around Rs 3800 crore per year, which is direct loss for other telecom players.

Now, even telecom interconnection charges will be scrapped. At the same time, Vodafone and Idea and other telecom operators will find themselves stuck between a rock and a very hard place. But now they can't because they are anxious their customers will move to Reliance Jio, he added.

The Authority observed that when a TSP establishes a network, it is not only for sending but also for receiving calls. This is because the major operators follow calling party pays (CPP) regime under which the calling party pays to his/her service provider for the call, while the called party does not have to pay for the call.

In a decision that has disappointed incumbent telcos, TRAI has slashed the Interconnect Usage Charge (IUC) from 14 paise/min.to 6 paise/min.

Mr. Jagnani further adds, "At a time when there are talks of providing incentives to the industry, which is ailing with pressure on profitability, elevated debt levels, and continued capex requirements, the timing of this reduction in IUC would add to the woes of the industry".

Bharti Airtel and Idea Cellular management have written to Trai for continuing the IUC.

The phrase 'You don't know what you have till it's gone, ' now seemingly apt for operators who charge for voice calls. TRAI has said that IUC charges will be removed completely from 2020. Bharti said Wednesday that the reduction in interconnect fees would benefit only one carrier and add to stress that the industry is facing.

TRAI said in its new regulation, "it has been observed that reducing termination rates (IUC) has benefitted consumers and enhanced competition".

Vodafone has announced it is "disappointed" with TRAI's decision and is now considering its options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in its history.

Last night, Vodafone had expressed dismay at TRAI's latest decision and had claimed that the "retrograde" measure, unless mitigated, will have serious consequences for investment in rural coverage and government's vision of Digital India.

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