Trai slashes call link fee to 6 paise a minute: Reliance Jio to gain as Airtel & Vodafone see more financial stress

The Telecom Regulatory Authority of India (Trai) on Tuesday slashed the charge paid by telcos for mobile calls made by their customers to networks of other companies to 6 paise a minute, from 14 paise at present. However, it still remains to be seen whether this will eventually translate in to lower phone bills for consumers as incumbent telecom players claim their financial stress will increase.

Mobile companies currently charge 14 paise a minute for allowing a domestic call from a rival operator to terminate on their network. This charge, called Interconnection Usage Charge or IUC. Mobile tariffs will fall if the operators pass on the benefit of reduced IUC charge to customers.

The move is expected to benefit Mukesh Ambani-run Reliance Jio which is offering free voice calls on its network. Trai said the new call termination charge will be applicable from October 1, 2017, and will be completely eliminated from January 1, 2020.

Trai has gone ahead with the reduction of the interconnect usage charge despite strong opposition to the move from established operators like Bharti Airtel, Vodafone and Idea Cellular which wanted the termination rate to be raised and benchmarked against the actual cost.

The move is expected to benefit new entrant Reliance Jio which has been seeking waiving of the charge, saying it will benefit consumers. Trai said on the basis of comments received from stakeholders, in writing or during the open house discussion or during the workshop, the Authority has prescribed revised domestic mobile termination charges.

The incumbent operators had informed Trai that the termination cost works out 30-35 paise a minute. The lowering of termination charges below the full cost of the terminating operator will benefit  the new operator (Reliance Jio) which is offering free voice calls.

This money is paid because the operator, on whose network the call ends, carries the call on its network from an exchange to the end user. This requires the operator to invest in setting up infrastructure, the incumbent players claim.

Their contention is that RJio is terminating just one call at its end for every 10 calls it sends to the competing operator's network as the new operator offers free voice service. RJio has a greenfield 4G network that allows it to offer voice calls practically at zero cost. The incumbent players have also been complaining about financial stress.

Idea Cellular reported its third consecutive quarterly net loss of Rs 815 crore in the June quarter this year due to tariff war unleashed by Reliance Jio.

Similarly, Sunil Mittal-promoted Bharati Airtel, the country's largest telecom operator, reported 75 per cent fall in June quarter net profit at Rs 367 crore.

Lowering of IUC will not only impact competition but also fuel financial stress in the mobile industry, they had added. However, Reliance Jio has been pushing for a 'Bill and Keep' model wherein the interconnection charge is reduced to zero. Jio claims that if the charges are not reduced then incumbent operators stand to gain Rs 1,700 crore every month.

The government has admitted that the telecom sector is going through a financial crisis. It has set up an inter-ministerial group to go into the issue and find ways to revive the industry.

TELCOS TO MOVE COURT
"This is clearly disastrous financially for an industry already reeling under financial pressure. A majority of the members will certainly seek court relief given the magnitude of the financial loss,'' said Rajan Mathews, director general, cellular operators association of India (COAI).

A majority of the members will also seek clarity from Trai on the model used, methods assumptions and cost parameters used to arrive at their number. Also any indication this will drive down tariffs and benefit customers, is misguided as IUC has no correlation to market prices which are driven by competitive dynamics and not IUC,'' he added.

(With inputs from PTI)