Airtel and Vodafone slam TRAI's decision to reduce call connect charges

Aaron Brown
September 21, 2017

"The incumbent operators have a history of opposing all the IUC regulations over the last eight years, but have not been successful in thwarting passing of the benefits of lower IUC to customers".

The cellular operators association of India (COAI) has called the interconnect regulation disastrous and has made a decision to go to the court. IUC, to simplify, is the amount paid by one telecom operator to another for facilitating voice calls for its customers.

The IUC mainly consists of termination charges, originating charges and carriage/transit charges.Interconnection allows subscribers, services and networks of one service provider to be accessed by subscribers, services and networks of the other service providers.

The alternative to interconnect charges is the Bill and Keep regime: if you're making a call, then your telecom operator keeps all the money. "Bharti alone received about $75 million (Rs 498 crore) in interconnection revenue from Jio in April-June 2017", Fitch said.

Jio, which began charging for data April 1, took another swing at rivals earlier this year by offering a US$23 4G-enabled feature phone with tariff plans as low as 23 rupees for two days or 153 rupees monthly. "There should be a fair revenue share".

Now, even telecom interconnection charges will be scrapped.

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Larger players like BhartiAirtel and Idea typically have a significantly higher traffic of incoming calls than outgoing, according to a report by Kotak Institutional Equities. The more the customers on your network, the more they are likely to call others within the network.

The Authority observed that when a TSP establishes a network, it is not only for sending but also for receiving calls.

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. In simple words, if you are calling from an Airtel number to a Vodafone number, Airtel is bound to pay IUC to Vodafone as your services connect.

Bharti Airtel plunged as much as 6.3%, and Idea fell 7.6%. It also accelerated the consolidation rate in the industry and put a higher emphasis on charging for data. Moving towards BAK will encourage adoption of latest technologies and the deployment of IP-based telecom networks.

TRAI said in its new regulation, "it has been observed that reducing termination rates (IUC) has benefitted consumers and enhanced competition".

It said that the sharp drop in the IUC rate will only help transfer part of its cost to other operators, thereby further worsening the financial health of the industry.

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