Published: Thu, September 21, 2017
Worldwide | By Sean Reid

Telecom Stocks Tumble Up To 7.4% On Trai Move

Telecom Stocks Tumble Up To 7.4% On Trai Move

"An IUC charge of 6 paise per minute will translate into savings of over Rs 5,000 crore for Jio while RCOM and Aircel will benefit by around Rs 250 crore", a source said.

Trai said termination charges on calls from mobile to wire line and vice versa will continue to remain zero while from 1 January 2020 termination charge for all types of domestic calls will be zero. This price differential, which is higher than the IUC rate, is clearly a way for incumbent operators to subsidise on-net calls, and is anti-competitive.

TRAI announced its decision to cut IUC for mobile calls on Tuesday.

Here are the main issues and the justifications given by the TRAI in its choice for BAK in the coming two and half years. Executives from these companies wrote to TRAI in separate letters pleading not to cut IUC rates and despite their efforts TRAI moved to cut rates.

"Operators pay the MTR when one of their customers makes a voice call to a user on another network, with the fee going to the operator on which a call terminates".

However companies were still not happy.

Vodafone India, the market's second-biggest carrier, described the move as "retrograde" and said it could affect investment in network coverage in rural areas.

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Trai's latest directive to bring down the Interconnect Usage Charges from existing 14 paise to 6 paise is yet another stressful thing to happen to the already reeling telecom sector in India.

Under Bill and Keep regime, the operators only keep record of incoming calls on their network, but do not raise any demand from other operators. Similarly, the IUC reduction will enable the new entrant in the game - Jio, increase subscriber base by offering free voice and "unjustifiable" promotional plans without adequately compensating competition infrastructure being used.

The cellular operators association of India (COAI) has called the interconnect regulation disastrous and has made a decision to go to the court. IUC is a tiny part of the dwindling share of call revenues in total revenues, driven by ever-growing data traffic. Airtel, the country's biggest telecom company, collected Rs 10,279 crore past year on ICU charges, which contributes about 14 percent to 18 percent of their operating profits.

Operators do not charge customers for incoming calls, but the carrier from whose network a call originates pays the network that receives the call.

"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.

Voice calls amounted to 70% of Indian telcos revenue right up till December 2016.

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