Telcos to Approach TRAI for Fresh Consultation on Interconnect Charges

The Cellular Operators Association of India (COAI) will seek fresh consultations on scrapping interconnect usage charge (IUC) from the telecom regulator TRAI, according to a report by the Mint.

Telecom operators levy IUC on incoming calls from the network of other operators. These charges are a major source of revenue for telecom companies.

The telco lobby would discuss with the regulator whether the move would achieve the intended objective as the tariffs are already very low, a top official at the telecom lobby told the paper.

In September 2017, the Telecom Regulatory Authority of India (TRAI) had slashed the IUC by more than half to 6 paise per minute from 14 paise per minute effective from October 1. The telecom regulator also ordered an end to IUC from January 1, 2020, to bring down tariffs.

“Looking at that order, we are saying that have there been material changes that would need to have this revisited…You want to look at the objectives you were trying to achieve, has it begun to achieve the objectives for which you believed it was necessary to reduce the interconnect charge,” COAI director general Rajan Mathews said in an interview.

Telecom operators were hit hard by the order. Bharti Airtel had claimed that it has suffered a loss of Rs 6,800 crore in the last five years due to low network interconnection charges set by TRAI. The operator’s quarterly profit plunged 39 percent to Rs 306 crore in the three months ended 31 December 2017.

Similarly, Idea Cellular’s quarterly loss more than tripled to Rs 1,285.6 crore in the same quarter. Revenues of the two incumbent operators have been falling consistently.

Zero IUC means operators such as Bharti Airtel Ltd, Idea Cellular Ltd, and Vodafone India would make no money for receiving calls from other networks. However, if the traffic flow among operators is symmetrical, it will not have a negative impact on any operator as it is simply a charge paid from one operator to another, the report said.

“The reduction in IUC by TRAI should have lowered access charges payout. However, the impact was just the opposite. Free calling plans by telecom operators sharply increased the minutes of use, which, in fact, increased the IUC payout,” according to a report by Crisil.

The situation is unlikely to improve in FY19 and the industry’s operating profit margin is expected to contract a further 150-200 basis points owing to the full-year impact of the IUC cut, the report added.

The COAI also suggests that TRAI should start a process to outline the cost–benefit analysis of a regulation. This would provide details regarding the benefits and costs of benefits.-moneycontrol