TRAI cuts mobile termination charges 57%; eyes waiver by '20

Delia Watkins
September 21, 2017

The regulator further added that interconnect usage charges will be completely scrapped starting January 1, 2020.

The TRAI has cut the interconnect user charges from 14 paise per minute to 6 paise. While Airtel is the largest telecom operator in terms of subscribers and revenue, Reliance Jio has emerged as the top 4G operator by adding 130 million 4G subscribers in almost 12 months.

In a statement Airtel said, Airtel has indirectly accused TRAI of favoring Jio.

TRAI said in its new regulation, "it has been observed that reducing termination rates (IUC) has benefitted consumers and enhanced competition". He also stated that the decision would have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India. And there's a good reason why.

The reductions that begin Oct 1 will probably bolster Reliance Jio Infocomm Ltd's earnings by 76% in the year ending March 2019, Morgan Stanley analysts Parag Gupta and Amruta Pabalkar estimate. They are arguing that IUC should exist because the ratio of calls between their telecoms and Reliance Jio is asymmetric.

Markets where market forces, and not the regulator, determine interconnection charges, would lead to telecom operators trying to create a major disincentive for calling people on another network, and discriminatory charges against call-recipients of another network. Reliance Jio uses Voice-Over-LTE technology to make phone calls.

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Kotak Institutional Equities, the institutional India brokerage, predicted that Jio, which now pays close to $1 billion in interconnection fees, will save $550-$600 million (30-33 rupees per user) annually as result to the new charges.

The argument of incumbents is there a huge traffic asymmetry between incoming and outgoing calls from Jio's network.

The development comes on the back of a prolonged battle between the Mukesh Ambani-led Reliance Jio and the top three telcos - Airtel, Vodafone and Idea, over the issue. Take the case of Airtel. A few years ago, they would have bumped voice and data tariffs.

Since Jio's entry it has dictated the trends of how telcos would charge customers resulting in more bundled plans.

It said that the industry average revenue per user declined by 20 to 22 per cent year on year in the the first quarter of FY18, reflecting Jio's offer of free voice, text and data services for six months from September 2016 and its subsequent discounts and promotions to win subscribers. "However, that this move by TRAI opens up the possibility of Jio becoming more aggressive is a clear negative for incumbents in our view", Kotak Equities said in a note.

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