Why int'l calls from India cost a bomb despite lowest termination charges

Domestic customers pay up to eight times as much for making calls abroad that what overseas callers to India pay

Here is the reality. India has one of the lowest termination charges for international calls at 53 paisa a minute.  But when customers from India want to call abroad they have to pay a hefty termination charge which at an average is seven to eight times (Rs 3.50 to Rs 4 a minute) more than what callers from abroad pay for calls to India. 

That is why calling abroad is so expensive from India. So domestic customers pay an average of Rs 7.70 per minute in West Asia, Rs 2.48 a minute in Europe and Rs 1.01 a minute in the US as termination charges to international carriers. For calls made to the Sultanate of Oman, domestic customers fork out a staggering Rs 15.44, for Switzerland Rs 14.08, and Rs 2.44 for Singapore as termination charges to their carriers. 

The Telecom Regulatory Authority of India (Trai) is planning to further reduce the termination charges by nearly half to around 25-30 paisa a minute. That, on the surface, might sound out of sync with the reality.  And that is what incumbent operators are saying -– that it will be suicidal. 

The reason is simple: it will increase the skew of the ratio between international incoming calls to outgoing calls even further. In 2011 there was one outgoing call from India against 5 incoming calls, but currently that ratio has dramatically gone up by 1:20. So revenues from international calls for the incumbent operators are only going southward, while international carriers are making a huge amount of money.

That is why they want do not want Trai to go ahead with its plans, Instead they want the termination charges to be reversed and increased so that they are closer to what customers from India have to pay to call abroad. They are asking for a level-playing field. 

According to their estimates, India will earn at least Rs 60 billion of incremental forex for every one-rupee increase in termination charges. They argue that currently the opposite is happening, the country is losing foreign exchange by paying for the high termination in other countries. It will also ensure that Indian customers get affordable tariffs. 

But new kid on the block Reliance Jio has given a contrarian view, which seems to have stuck a chord with the regulator. In its presentations to the regulator, Jio has pointed out that that an increase in the termination charges will only lead customers abroad to hasten their shift to other cheaper and free call alternatives whether it is Skype, Whatsapp, Facebook just to name a few. So even the current revenues which they are getting will only fall, just like the advent of whatsapp messaging virtually killed the SMS market. 

They argue that as their call costs will drop the chances are that they will use their phones rather than the applications like Skype and whatsapp to make calls. It will also reduce growing menace of grey calls as these alternatives will no longer be so attractive. And thirdly as far as the termination rates in other countries are concerned there is very little that Indian telcos or the government can really do.