New Delhi - Indian telecom regulator TRAI came out with a regulation cutting call termination charges from mobile to mobile by over half to 6 paise per minute effective from October 1. The measure drew stiff opposition from a majority of telecom operators who plan to seek legal redressal.
The sector regulator also plans to phase out Interconnection Usage Charges (IUC) by January 1, 2020.
"For mobile to mobile, termination charge has been reduced from 14 paise per minute to 6 paise per minute with effect from October 1, 2017," the Telecom Regulatory Authority of India (TRAI) said in a statement.
"Such a revision in the mobile termination charge is in line with the international trends."
Domestic termination charges are the charges payable by a telecom service provider (TSP) whose subscriber originates the call, to the TSP in whose network the call terminates.
TRAI further added: "From January 1, 2020 onwards the termination charge for all types of domestic calls shall be zero."
The TRAI paper said: "The elimination of IUC will result in direct benefit to customers through lower tariffs."
It said for other types of calls (such as wire-line to mobile, wire-line to wire-line and wire-line to mobile), the termination charge would continue to remain zero.
The TRAI said: "Further, the cost of termination of calls will drastically come down over a period of two years and very small residual value, if any, can be absorbed by the TSPs in their tariff offerings. As a result, the Authority prescribes a Bill and Keep regime for the wireless to wireless calls effective from the January 1, 2020."
The prevailing Interconnection Usage Charges (IUC) Regulation was notified on February 23, 2015 and came into effect from March 1, 2015.
This regulation of TRAI will give a big jolt to the incumbent TSPs like Bharti Airtel, Vodafone India and Idea Cellular who said a lesser IUC regime will be detrimental for the industry. However, new entrant in the industry Reliance Jio has always demanded zero termination charges.
Reacting to TRAI decision, Cellular Operators' Association of India's Director General Rajan S. Mathews said: "Clearly this is a disastrous tariff order. We have indicated earlier that the regulator has to be transparent about how it is arriving at a number. This massive reduction is disastrous for the financial health of the sector. Majority of our members will look for legal redressal."
He added that customers will not be benefitted from this.
Earlier Vodafone Group CEO Vittorio Colao had urged the Indian government not to reduce mobile termination charges further.
In a letter dated August 22, Colao said: "On mobile termination charges, we are seriously alarmed to see reports that the Regulator is considering a reduction in MTC at a time when the industry is facing such immense hardships. Any reduction in MTC risks large scale site shut-down of already unprofitable sites in rural India and which would greatly diminish the population coverage of mobile telephony."
Interconnection allows subscribers, services and networks of one service provider to be accessed by subscribers, services and networks of the other service providers. If networks are efficiently interconnected, subscribers of one network are able to seamlessly communicate with those of another network or access the services offered by other networks.
The TRAI said it would keep a close watch on the developments in the sector particularly with respect to the adoption of new technologies and their impact on termination costs.
"The Authority, if it deems it necessary, may revisit the aforementioned scheme for termination charge applicable on wireless to wires calls after one year from the date of implementation of the regulation"," it added.
According to industry sources, if the IUC is slashed by 6 paise per minute, on an annualized basis Reliance Jio will make a savings of Rs 5,000 crore. Airtel will make a loss of Rs 2,000 crore, Vodafone Rs 1,500 crore, Idea Rs 1,200 crore, while Reliance Communications and Aircel will benefit by Rs 250 crore.
If the IUC is completely done away with then Reliance Jio will make additional savings of over Rs 4,000 crore. Airtel will make a loss of Rs 1,500 crore, Vodafone and Idea (merged entity) will make loss of around Rs 2,200 crore. However, Reliance Communications and Aircel (merged entity) will benefit by Rs 350 crore.