Trai Move To Impact Cell Players Most

New Delhi, January 27: | Updated: Jan 28 2003, 05:30am hrs
Following the Telecom Regulatory Authority of Indias (Trai) latest amendment to the telecommmunication tariff order and interconnect usage charges (IUC) regulation, the question was what will the Indian telecom scenario look like and who gained and who lost among providers of fixed, cellular and limited mobility players.

Terminating Of Call Costs 29 P/Min

New Delhi, January 27: The cost of termination of a call for cellular operators is 29 paise per minute in metros and 40 paise per minute in circles according to the Telecom Regulatory Authority of India (Trai) estimates.
The estimates were based on audited results for 2001 of 25 operators, which accounted for 70 to 80 per cent of subscribers, according to Trai. They were unwilling to share the cost of originating a call for a cellular operator.

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Consultancy firm KPMG conducted an analysis and came up with some answers it shared with FE. According to the study, prices of different services like WLL M (wireless in local loop - mobile), fixed and cellular will converge and will not be a major differentiator post-April 01, 2003.

Cellular operators are likely to take the biggest hit from the new tariff regime since they will see a significant fall in revenues - to the extent of 25 per cent - with all incoming calls being free, irrespective of the type of service. This is after factoring in a 20 per cent rise in minutes of usage (MoU). Also, the provisioning of interconnection charges in place of airtime charges will not be able to offset the fall in airtime revenues on incoming calls which form a significant portion of cellular revenues, KPMG said. According to KPMG executive director Rothin Bhattacharya, the mass migration expected towards limited mobility from cellular players may get postponed.

Hence, WLL M operators may not gain as high a market share as was expected earlier. On the other hand, cellular industry will see a significant fall in revenues because of freeing of incoming calls and increased cost of operations, KPMG said. It also suggested that basic operators (fixed line operators) would see a marginal fall in their revenue, but will remain revenue positive overall.

The cellular industry should be jubilant on one note as its subscriber base or minutes per usage (MoU) will increase. However, since the current spectrum allocation in India is very poor (amongst the lowest in the world), cellular operators will have to bear high capital expenditure in order to expand existing capacities. This will further increase their cost of operations, says the KPMG analysis.

Demystifying the effect of each of the clauses on fixed line operators, KPMG points out clauses which would have a revenue positive effect:

*Increase in rental for exchanges with capacity 30,000 lines and above;

*Free calls reduced from 60 metered call units (MCUs) to 30 MCUs in urban areas and from 75 to 50 MCUs in rural areas;

*Increase in fixed-to-fixed and fixed-to-WLL (M) charge from Rs 0.40 per minute to Rs 0.60 per minute;

*Increase in fixed-to-cellular call in metro area from Rs 0.40 per minute to Rs 0.80 per minute;

*Increase in fixed to cellular call in non-metro areas from Rs 0.40 per minute to Rs 1.20 per minute;

*Increase in termination charge from Rs 0.40 per minute to Rs 0.80 per minute in circle and Rs 0.50 per minute in metro areas;

*Change in call tariff gradient from Re 1 after free calls, up to 300 MCUs (instead of 500 MCUs before) and Rs 1.20 beyond 300 MCUs in urban areas and Rs 0.80 after free calls, up to 300 MCUs (instead of 500 MCUs before) and Rs 1.20 beyond 300 MCUs in rural areas.

A clause that would have a negative effect on basic operators is the payment of interconnection charge to mobile and WLL (M) operators, said Mr Bhattacharya.

The clauses that would have a revenue positive impact on cellular operators include:

*Payment of termination charge by WLL-M and fixed line operators to mobile players (Rs 0.40 per minute in Circle area and Rs 0.30 per minute in metros); and

*Expected increase in minutes of usage (MoU).

But a clause that would have a revenue negative impact on cellular operators is that all incoming calls will have to be free, KPMG said.

WLL (M) players will have to bear/pass the interconnection cost to the customers which will increase their overall cost. Hence airtime charge in WLL (M) will also increase. The large scale migration from GSM to WLL (M) which was expected earlier may get mitigated.