Retrograde regulatory measure will significantly benefit Jio: Vodafone

Marsha Scott
September 21, 2017

Most members of the COAI have been bitterly opposed to a cut in the IUC as it will hurt their revenues.

Jio is estimated to earn $500 million-600 million per year from incumbents.

The scrip of Idea Cellular fell by 3.43 per cent to end at Rs 80.15 on BSE.

"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 these charges worked as disincentive for deployment of new technology such as VoLTE and migration to IP networks by operators, where there are no interconnection charges. Whereas, competitors like Vodafone, Bharti Airtel and Idea Cellular took a hit.

Trai also believes that this move would prevail flat rates in the country where no telecom will pay to another.

The telecom regulator has opted for Bill and Keep, BAK, model for interconnection usage charges, that one operator pays to the other for call termination.

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However companies were still not happy.

Vodafone said it was disappointed with Trai's decision as it comes at a time when the Indian telecom industry is "experiencing the greatest period of financial stress in its history", reported The Indian Express.

The company said that "This is yet another retrograde regulatory measure that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole".

They said, "We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress".

In a statement, TRAI said: "It has been observed that reducing termination rates (IUC) has benefitted consumers and enhanced competition..." In fact, for the first few months, Reliance Jio kept complaining that incumbent players were never providing it with enough interconnects, something that resulted in a huge voice call drops on its network, it said.

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. One can argue that voice call charges are also factored into the current tariffs but telcos can argue that if voice calls are offered for free, there's no way they can reduce the existing tariffs because of lower IUC charges. Other types of calls such as those made from landline telephones (wired connections) have always been not subjected to any interconnection charges. The new regulation may see the company report even more hard numbers, analysts said.

Other reports by MaliBehiribAe

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