Reliance Jio Prevails Over Airtel As TRAI Cuts Call Connect Charges

• Mobile-to-mobile termination charge reduced to 6 paisa per minute from October 1, 2017
  
• For other types of calls, the termination charge will remain remain zero.
  
• Termination charge for all types of domestic calls will be zero from January 1, 2020.
  

India’s telecom regulator has cut the fees for cross-network calls by more than half, a move that will hurt larger operators like Bharti Airtel Ltd. even as the new entrant Reliance Jio Infocomm Ltd stands to gain.

Interconnection usage charges for mobile-to-mobile calls have been reduced to 6 paise a minute from 14 paise starting October 1, according to a media release by the Telecom Regulatory Authority of India. From January 1, 2020, the charges will stand abolished.

Rajan Mathews, director-general of Cellular Operators Association of India, said the incumbent operators will challenge the decision in court.

Also Read: Telecom Experts Rue TRAI’s ‘Nail In The Coffin’ Move

Vodafone India is considering its options in response to TRAI’s “disappointing” decision, a company spokesperson said in an emailed statement. “This is yet another retrograde regulatory measure that, unless mitigated, will have serious consequences for investment in rural coverage,” the statement added.

An operator pays IUC whenever a rival provides access to its network to complete a call. Larger players like Bharti Airtel, with deeper rural networks and premium pricing, typically see significantly higher traffic of incoming calls than outgoing, according to a report by Kotak Institutional Equities in July. Which means, they are the net earners of interconnect charges. An aggressive player like Reliance Jio, with free voice calling, is a net payer, a reason why it wanted them abolished.

The reduced charges will “open up worrying pricing flexibility” for Reliance Jio after it triggered a tariff war by offering free services for six months to March, according to a JPMorgan report highlighting the challenges the industry could face. If interconnect costs are halved, it will add Rs 27-30 average revenue per user for Jio, the bank wrote.

Sanjay Kapur, former chief executive officer of Bharti Airtel, told BloomberQuint that the lower IUC may cause some disruption or stress to older operators but will begin to nullify as the new operators gain share of call traffic.

The regulator’s decision follows a consultation paper it floated in 2015. Older operators like had demanded an increase in such charges. Bharti Airtel argued that Reliance Jio’s push to abolish the charges would “kill the industry” and cost telecom operators nearly Rs 15,000 crore to Rs 20,000 crore every year.

Telecom Industry Reacts

Incumbent Players Will Move Court: COAI

TRAI’s Decision Pre-Meditated And Not Impartial: Sanjeev Aga

Tricky Balancing Act: Rahul Khullar

Also Read: Why Ambani, Mittal Are Squabbling Over IUC And MTR: BQ Explains