Cut in mobile call connect charges retrograde move: Vodafone

Cut in mobile call connect charges retrograde move: Vodafone

Mobile bills are set to get cheaper. Vodafone and Airtel have fiercely opposed the direction. "1st October 2017... From 1st January 2020 onwards the termination charge for all types of domestic calls shall be zero". 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 it was "genuinely dismayed" by the decision.

Airtel said, "The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favour".

Fitch Ratings today said Reliance Jio will gain from an additional $500 million to $600 million revenue via the new interconnection regime. And there's a good reason why. Reliance Jio, which has a large number of outgoing calls to other networks, is a key beneficiary of the cut.

Operators in India do not charge customers for incoming calls, but the carrier from whose network a call originates pays the network that receives the call. TRAI stated that the increased usage among the masses will help the telecom companies recover the losses incurred by reducing IUC charges.

Reliance Jio said it is appalling that the incumbent operators have still gone ahead and made untrue and baseless allegations against the process for determination of IUC or the telecom regulator. With the prices slashed, call rates are expected to drop.

According to brokerage Motilal Oswal, the latest cut could hurt market leader Bharti Airtel's annual revenue by 6%-7%. This move will benefit a lot to the new telecom Reliance Jio. Take the case of Airtel. A few years ago, they would have bumped voice and data tariffs.

The move, say telecom experts, would further lower incumbents capacity to invest in the network.

"This also puts a lot of load on the network and affects its own customers", Airtel had said earlier.

The phrase 'You don't know what you have till it's gone, ' now seemingly apt for operators who charge for voice calls.

"Operators with large subscriber bases tend to be net recipients of these interconnection fees. This rule will adversely impact incumbents that still rely on traditional network calls", Dharia added. "This move is likely to keep the competitive intensity for the industry high and prolong the restoration of pricing power, a must for all operators to generate adequate return on investments".

In a letter to Trai chief R.S. Sharma last month, Idea chairman Kumar Mangalam Birla said the call termination cost of a typical Indian cellular firm worked out to 30-35 paise a minute.

The IUC rates have been the biggest issue between incumbents telcos and Reliance Jio.