India termination rate cut to hit big three hardest - Mobile World Live

India termination rate cut to hit big three hardest

25 SEP 2017

A Telecom Regulatory Authority of India (TRAI) move to reduce the interconnect charge by more than 50 per cent will lead to a 4 per cent to 5 per cent fall in EBITDA for the country’s three major operators – Bharti Airtel, Vodafone India and Idea Cellular, according to India Ratings and Research.

The research company predicts the controversial reduction will allow Reliance Jio to save as much as INR40 billion ($625 million) a year, which analysts say could lead to even lower prices by the newcomer, The Economic Times (ET) reported.

Last week TRAI announced the mobile-to-mobile interconnect usage charge, or termination fee, will be cut from INR0.14 to INR0.06 starting 1 October and be eliminated completely from 1 January 2020.

India Ratings and Research said incumbents’ EBITDA could fall by a total of 7 per cent to 9 per cent after termination fees are eliminated.

Since Jio entered the market in September 2016 with nationwide 4G coverage and extended free voice and data offers, operators’ profitability plunged. Market leader Bharti Airtel’s net income for fiscal Q1 (ending 30 June) fell 75 per cent year-on-year to INR3.7 billion ($57 million).

Meanwhile, former TRAI chairman Rahul Khullar told ET the move by the regulator has no economic justification, insisting the entire interconnect regulation “is quite simply, appalling”.

He went on to say: “It appears to be based on a pipedream that some people are trying to sell that data will drive the bulk of telco revenues in India in all of two years. Have you seen the state of our telecom infrastructure, private and public? Do you seriously believe next generation networks are around the corner? Truth is, that voice still accounts for nearly 80 per cent of telco revenues, and I don’t see the share of data revenues even exceeding 35 per cent of total telco revenues in the next two years.”

The three major players plan to challenge the regulator’s decision in court.


Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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