Big relief for Airtel, Vodafone Idea! Zero-IUC regime put off for a year

By: |
New Delhi | Published: December 18, 2019 6:16 AM

While reducing the termination rate by a massive 57% to 6 paise per minute in September 2017, Trai had said that from January 2020 operators would move to a regime of zero rate.

Move comes as big relief to Bharti Airtel and Vodafone Idea

The Telecom Regulatory Authority of India (Trai) on Tuesday avoided a disruption in the telecom sector by retaining the current termination rate of 6 paise per minute for another year — January 1, 2020, to December 31, 2020 — after which the rate will become zero.

While reducing the termination rate by a massive 57% to 6 paise per minute in September 2017, Trai had said that from January 2020 operators would move to a regime of zero rate.

However, in a consultation paper floated in September 2019 it expressed reservations about moving to a zero rate regime from January 2020 since call imbalance – incoming versus outgoing – amongst the incumbents and Reliance Jio still existed. The paper, however, noted that the imbalance had reduced from what it was two years back.

On Tuesday, while retaining the rate for another year, Trai said that it has to keep the interests of 2G/3G subscribers in mind. At the end of September 2019, out of approximately 1,174 million mobile subscribers, 557 million are 4G data subscribers and the remaining 617 million are still using 2G/3G services. “While reviewing the IUC, it is necessary to balance interests of both of these subscriber segments,” Trai said.

The regulator though said all three private operators have rolled out VoLTE extensively and plans to further expand the 4G networks. Soon the government will also assign 4G spectrum to public sector telcos. “Accordingly, it appears that soon all the wireless access service providers would offer 4G services to customers across India,” the regulator said.

Though the incumbent operators welcomed the move of retaining the current rate for one more year they added that ideally it should have been extended by two years. However, analysts maintain that in another year the traffic imbalance amongst the incumbents and Reliance Jio would have bridged considerably, making termination rate irrelevant.

While incumbents like Bharti Airtel and Vodafone Idea were opposed to the idea of moving to a zero rate regime from January 2020, Jio had batted for it. In fact, sensing that the zero rate regime would be put in abeyance, Jio had started charging 6 paise per minute from its customers for calling on rival networks.

Termination charge is paid to the operator on whose network the call terminates by the originating network.

In its September consultation paper, Trai had said that with the consolidation in the sector and reduced tariffs, the average outgo per minute which was Rs. 0.23 per minute at the end of September 2017, has come down to Rs. 0.13 per minute at the end of March 2019.

Trai had said that traffic imbalance between an only 4G operator (Reliance Jio) and other operators had reduced from peak of approximately 60 billion minutes per month in December 2017 to 40 billion minutes per month in June 2019.

According to figures shared by Trai, Bharti’s incoming calls (from other networks) stands at 53.18% compared to 46.82% of outgoing calls. Jio’s incoming calls stand at 40.57% and outgoing at 59.43%, while for Vodafone Idea incoming calls are 56.22% and outgoing at 43.78%. Since termination charges are paid on the basis of outgoing calls, it can be seen that Jio has the lowest percentage of such calls so its outgo on termination will be the highest. It is because of this imbalance that the incumbents were opposed to any move by the Trai to reduce the termination charges to zero from January, 2020.

Reasoning in favour of reduction of the rate, the Trai had earlier said that the mismatch between Jio and incumbent operators will go in a couple of years when most of the players would switch to 4G networks where the cost of terminating calls is very low and hence can be absorbed by the operators. However, developments have not kept pace with its expectations. The Trai had said in its paper that while operators are adopting packet-based technologies and footprint of 4G is increasing, it is also a fact that not all operators are expanding their 4G at the same pace.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1CIL seeks lower rail tariff for coal transportaion
2TikTok was tracking users for over a year in what appears to be clear violation of Android policies
3Deutsche Bank infuses Rs 2,700 cr in India operations for expansion