1. Predatory pricing: Legacy telcos, association warn TRAI of legal action

Predatory pricing: Legacy telcos, association warn TRAI of legal action

Also say may take grievances to DoT, PMO, imply rules disfavour ‘all but one operator’

By: | New Delhi | Published: February 22, 2018 5:07 AM
TRAI, telecom, Cellular Operators Association of India, Kotak Institutional Equities, Credit Suisse, narendra modi,  predatory pricing, news on TRAI, latest news on TRAI On Tuesday, COAI in a statement said Trai’s regulation has put all but one operator at a huge disadvantage and that its regulations had distorted the market. (PTI)

The battle lines drawn between incumbent telecom operators and the Telecom Regulatory Authority of India (Trai) hardened on Wednesday with the former threatening to legally challenge the latter’s recent regulations on predatory pricing and even spoke of approaching the department of telecommunications and the Prime Minister’s Office with their grievances with the regulator. Their chief grouse is that the regulations that Trai released last week on the definition of predatory pricing and significant market power benefits only newcomer Reliance Jio and is heavily loaded against the incumbents. Cellular Operators Association of India (COAI) director general Rajan Mathews said on Wednesday that its member operators will take a decision in a week or two on the future course of action after evaluating various options.

“The operators will be in a position to decide on legal and other options in a week or two,” he said. According to him, it is quite possible that the association and individual incumbent operators may separately challenge the regulations. The association said that majority of its members agreed with the assessment of Trai’s regulations, except Reliance Jio which had a divergent view on the matter. On its part, Trai termed the allegations levelled by the COAI as baseless and cautioned it against making unsubstantiated charges. It even said that it has become a habit with the COAI to make such allegations. Trai secretary SK Gupta said that the regulator functioned in a transparent manner and there’s no substance in the allegations that COAI has made. “Trai’s orders or regulations are preceded by detailed consultation papers and open house discussions with stakeholders,” he added.

On Tuesday, COAI in a statement said Trai’s regulation has put all but one operator at a huge disadvantage and that its regulations had distorted the market. Though it did not name Reliance Jio, it said that the regulation appeared “to be strengthening the ambitions of one particular operator with deep pockets and monopolistic designs at the expense of other operators”.

As per Trai, a tariff will be considered predatory if in a relevant market a telecom operator with over 30% market share offers services at a price that is below the average variable cost to reduce competition or eliminate competitors. Since the consultation paper on the subject was undertaken on the allegations of incumbent operators like Bharti Airtel, Vodafone and Idea Cellular that new entrant Reliance Jio is offering predatory pricing, the final regulations does not affect it in any way since it does not have 30% market share in any circle. This means that the operator can continue with its aggressive pricing strategy which the incumbents term as predatory.

Analysts have concurred with COAI’s views. For instance, brokerage Kotak Institutional Equities in its report said that Trai’s latest tariff order pertaining to issues such as interconnect usage charge compliance, predatory pricing, non-discrimination, etc, while largely maintaining status quo, makes a few subtle changes — (1) IUC-compliance is no longer a cardinal tariff principle; (2) significant market power definition is now restricted to revenues and subscriber; it included capacity and volumes earlier; and (3) selective pricing offers seen as violation of non-discrimination clause.

These changes are generally contrary to what the incumbents were seeking. Similarly, Credit Suisse has also written in its report that “restricting market share definition to mobile revenue and subscriber shares, and avoiding sub-market (voice, data) and other metrics of the market share (capacity, traffic carried) imply Jio will have reasonable flexibility on pricing till it crosses 30% share at the circle level”.

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  1. Invest Mint
    Mar 12, 2018 at 6:09 pm
    There is a term called 'Economies of Scale' where a deep-pocket company s its products in the market at a cut-throat price to gain more and more customers. Even if it manages to gain marginal profit, the volume of transaction is so big that it makes up with its profit. On the other side, it slowly kills the compe ion from the market as none other company could match its pricing. Looking at the cur situation in India's telecom sector, it is quite clear that there is one company which is playing in the 'Economies of Scale' mode. Unfortunately, the regulators who are supposed to check this practice, is laying the 'red carpet' for this company. Clearly, if this situation continues, there will be no compe ion in the market. God knows what will happen with the consumers then.
    1. Proper Tree
      Mar 12, 2018 at 5:56 pm
      It is understandable to promote the compe ion in the market, provided it is anchored on fair grounds. One cannot simply kill a group of companies in the name of 'fair compe ion'. It is very much evident that the rules are biased and are drafted keeping a single operator in mind. India's telecom sector is already under stress Aircel's bankruptcy is the latest example. If this kind of favoritism continues, the sector might see some more companies going Aircel way. Benefiting the consumers is good but how will you sustain that if there are none to provide the services. Clearly, the sector is heading towards monopolistic circumstances.
      1. Tele myths
        Mar 1, 2018 at 2:07 pm
        In past 12 month the regulator has changed many rules just to favour one operator. It looks like a nexus is working day in and day out to create a monopolistic market situation. This is a bad time for telecom market. Thank you The Reliance "JIO" Authority of India (TRAI) for creating such a mess in the market to favour one player.
        1. Tele myths
          Mar 1, 2018 at 2:03 pm
          There is nothing other players can do except going to the cout of law. That's the only hope which I see.
          1. Tele myths
            Mar 1, 2018 at 2:00 pm
            There are so many updates which took place in last 12 months, just to favour one operator. It looks like that the body is working to satisfy the need of one. This is not a good situation at all. The TRAI today is a true representation of The Reliance Jio Association of India. We should thank COAI for taking a stand against a big lobby which is in a process of creating a big mess for the market.
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