Retrograde regulatory measure will significantly benefit Jio: Vodafone


In a major blow to several top telecom operators in India, the country's telecommunications regulator TRAI has ordered the interconnect usage charges that the telcos impose on each other for handling calls to be slashed effective October 1.

"We are disappointed with this decision and are now considering our options in response to it". Bharti said Wednesday that the reduction in interconnect fees would benefit only one carrier and add to stress that the industry is facing.

India's second largest operator Vodafone also expressed dismay at the telecom regulator's decision and termed the move as a "retrograde" measure.

The cellular operators association of India (COAI) has called the interconnect regulation disastrous and has made a decision to go to the court.

While shares of Idea Cellular spiraled 3.73 per cent to now trade at Rs 80 after touching an intra-day low of Rs 77, stock of Bharti Airtel, which had also opposed TRAI's move to slash IUC, surprisingly gained 0.54 per cent to trade at Rs 396.95. "The reduction in the mobile termination charge is likely to yield consumer benefits". The Indian telecoms industry is already experiencing the greatest period of financial stress in its history.

"Interconnect charges (are) important in the current scenario, where traffic asymmetries have increased to unprecedented level of 10:1 as the new operator (Reliance Jio) offers free voice service", Birla wrote. From October 1, the IUC will be 6 paise.

Owing to the tsunami of "free" calls originating from Jio's network to other operators it has paid a hefty sum in IUC till now. This will let companies get along with their job and dispel charges of favouring Jio over other players. Reliance Jio, which started its commercial operation previous year, has been offering customers voice calls at no charge from day one.

"Operators with large subscriber bases tend to be net recipients of these interconnection fees".

Fitch said Bharti Airtel alone received about $75 million (roughly Rs. 483 crores) in interconnection revenue from Jio in April-June quarter this year.

So far, telcos were paying 14 paise/minute IUC which has now been reduced to 6 paise/minute. But now they can't because they are anxious their customers will move to Reliance Jio, he added. Going the full distance i.e. reducing terminating rates to zero by introduction of the BAK regime would help in immediately realising these benefits. IUC makes sure that there is always proper infrastructure and investment so call quality is not compromised. The Bill and Keep regime will encourage flat rate billing and time differentiated charges, both of which will improve capacity utilisation and will be in the interest of consumers.