CDMA players welcome move, GSM incumbents unhappy.
In move that might cost the incumbent telecom operators hundreds of crores but benefit new operators, the Telecom Regulatory Authority of India (Trai) today reduced termination charge for all types of domestic calls from 30 to 20 paise a minute.
Termination charges are paid by one operator to another on whose network the call ends. Industry sources said the annual net cost of termination charges is estimated at Rs 2,000 crore. Stocks of most telecom service providers fell sharply today.
| TERMINAL WORRIES (Share prices of telecom service providers fell sharply on Monday) | |||
| Company | Mar 9 | Net Chg | % Chg |
| Tata Tele (M) | 19.50 | -3.70 | -15.95 |
| Reliance Comm | 132.25 | -5.55 | -4.03 |
| MTNL | 59.60 | -1.55 | -2.53 |
| Bharti Airtel | 587.75 | -14.40 | -2.39 |
| Idea Cellular | 44.80 | -0.80 | -1.75 |
| Tata Comm | 405.60 | -4.15 | -1.01 |
| OnMobile Global | 229.20 | -1.75 | -0.76 |
| Spice Telecom | 67.70 | 0.85 | 1.27 |
| Share Price on BSE in Rs | |||
Incumbent operators like Bharti Airtel and Vodafone had asked for these charges to be raised, citing high operational costs. This move, however, is expected to help the seven new operators that stand to pay heavily for termination charges to incumbents.
GSM-technology mobile operators, which account for almost 75 per cent of mobile services in the country, said the regulator has failed to factor in all the costs associated with the termination of a mobile call.
“According to calculations based on international best practices, the three-year forward looking mobile termination charge was calculated at around 35 paise per minute. It is inexplicable how the value of 20 paise per minute has been determined,” said TV Ramachandran, director-general, Cellular Operators’ Association of India (COAI), the GSM operators' lobby.
New operators, however, are also unhappy. Several new operators, most of whom are expected to start operations by the middle of this year, the majority in GSM technology, said the increase was insufficient. “This reduction is not enough, they could have reduced it to 10 paise per minute. They should have put a ceiling on the tariff for each circle. This will not benefit the consumer,” said the head of a new telecom company.
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Meanwhile, operators of the rival CDMA technology have welcomed the decision. The CDMA body, Association of Unified Telecom Service Providers of India, said the move would reduce costs and promote consumer interests.
A spokesperson of CDMA operator Tata Teleservices, which is expected to make its entry into the GSM market soon, “Tata Teleservices Limited has been advocating a reduction in termination charges for a long time. The move will bring down tariffs and benefit the Indian telecom consumer.”
Trai Chairman Nripendra Misra asserted that the regulator has arrived at the 20 paise-figure based on the cost parameters of all the operators. “....Do you think we have done the exercise over the last 70 days to arrive at a figure that is not based on the cost,” Misra told Press Trust of India.
He, however, refused to comment on COAI’s allegation and did not reply to a query whether the operators should pass on the benefit of lower mobile termination charge to subscribers.
Industry experts say the move will impact the penetration of mobile services to the rural India. Telecom analyst Mahesh Uppal said: “The termination charges should have been held at their present price. Operators need a surplus to get into the rural areas. And such a move will impact the revenues of the incumbent operators that might focus again on the high-revenue urban areas rather than the rural areas where the margins are constrained.”
All operators, however, have welcomed the increased the termination charge for incoming international calls to 40 paise per minute against 30 paise.
“Trai had noted that the termination rates paid by Indian operators were 10 times higher than what they charged and so a very small increment in the international long distance (ILD) termination charges did not balance out the huge inequities in the ILD termination rates, COAI’s Ramachandran said.
Industry estimates said India will send out about 9 billion minutes next year, at an average termination rate of Rs 3 per minute for which India will pay out Rs 2,700 crore.
On the other hand, India will receive 25 billion minutes that, at a termination rate of 40 paise per minute, would yield termination revenues of about Rs 1,000 crore. In effect, Indian operators end up paying a net Rs 1,700 crore to international carriers though India would be receiving 16 billion minutes more than it sends out.