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Airtel, Vodafone Idea get an unexpected, but pleasant surprise from TRAI

TRAI's decision is expected to benefit incumbents Bharti Airtel and Vodafone Idea who had more incoming calls on their network compared to outgoing calls.

twitter-logo Manu Kaushik   New Delhi     Last Updated: September 19, 2019  | 19:51 IST
Airtel, Vodafone Idea get an unexpected, but pleasant surprise from TRAI
TRAI to review interconnect usage charges

The recent consultation paper by telecom regulator TRAI (Telecom Regulatory Authority of India) is expected to stir up controversy. It talks about reviewing TRAI's earlier stance of moving towards zero interconnect usage charges (IUC) regime - also known as Bill and Keep (BAK) - by January next year. IUC charges are paid by telecom operators to each other for facilitating calls. The charges are paid as per Calling-Party-Pays mechanism where the telecom operator from which the call is originating pays a certain amount (6 paisa per minute) to the telecom operator on whose network the call terminates.

IUC charges are applicable only on mobile-to-mobile voice calls; there are no IUC charges on other types of calls - mobile-to-landline, landline-to-mobile, and landline-to-landline. TRAI's decision is expected to benefit incumbents Bharti Airtel and Vodafone Idea who had more incoming calls on their network compared to outgoing calls. Market leader Vodafone Idea had 59.3 per cent incoming calls out of the total calls on its network in June (outgoing calls were 40.7 per cent). In comparison, Reliance Jio had 35.75 per cent incoming calls out of the total calls on its network in the same month. Having more incoming calls (than outgoing calls) indicate a net gain for the telco.

"It's going to favour old telcos if TRAI decides to extend the deadline for scrapping IUC charges. The charges have ensured that legacy networks reap benefits from their large investments over the years," says a telecom consultant. The last time (in 2017) when IUC rates were slashed from 14 paisa per minute to 6 paisa, there was huge uproar in the industry, primarily led by Airtel and Vodafone Idea. The incumbents were demanding a hike in IUC charges to 30 paisa in order to recover money invested in their network.

A sudden u-turn has left the incumbents leery as to what prompted TRAI to review its previous decision. Though logically, as a source in Airtel says, the TRAI's assumption (in 2017) that there will be symmetry in the sector over a period of time - that means all operators would have similar number of outgoing and incoming calls - has come down crashing. "Vodafone Idea's and Airtel's higher incoming call logs also show that their user base is well entrenched as compared to Jio," says Airtel source.

At the moment, nearly 85 per cent of the voice calls are made on 25/3G networks which are operated by BSNL, Airtel and Vodafone Idea. Jio, on the other hand, has a 4G-only network.

The US follows the BAK model; while the European Union seems to be cautious about adopting it. Under BAK, a telco does not have to pay any termination charge to its interconnecting telecom operator. Each telco bills its own subscribers for outgoing traffic that it sends to other interconnecting telcos and keeps all the revenue received from its subscribers.

The previous reduction in IUC charges in 2017 was challenged by Airtel and Vodaone Idea in the Bombay High Court, and the matter is sub-judice. Jio, which used to be a small player at that time, gained from the drop in IUC charges. Even though Jio is much bigger now (339.7 million subs), the imbalance in its incoming-outgoing calls puts it in a disadvantageous position if the TRAI decides to continue with IUC charges.

Also read: Vodafone Idea ahead of Reliance Jio as largest telecom operator in India in July: TRAI

Also read: Vodafone Idea share climbs 17% after firm emerges as largest telco in July, beats Reliance Jio

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