On Tuesday, The Telecom Regulatory Authority of India cut the mobile termination rate by a massive 57% to 6 paise per minute from the current 14 paise per minute. Unfortunately, this move would definitely render a loss of over Rs. 4,000 crore annually to the three big incumbents — Bharti Airtel, Vodafone and Idea. This eventually would lead to an annual saving of around Rs 5,000 crore for Reliance Jio.
On October 1, the new rate would come into effect but is sure to be challenged in courts by the other players in the industry. For the first time, Trai laid out its future course of action by stating that termination rates would become zero from January 1, 2020.
Trai revised the termination rates in March 2015 when it was lowered from 20 paise per minute to 14 paise. The regulator had stated that the rates should be reviewed after a period of two years. The analysts reported the cut in termination charge announced by Trai was very sharp and ideally it should not have been more than 20-25% to around 10-11 paise per minute.
The analyst was shocked to announce BAK from 2020 when it is difficult for the industry to totally move to VoLTE network where call delivery rates are very low. The Former Trai chairman Rahul Khullar said FE that nowhere in the world has the termination rate been made zero by law. And he added the only country where there is a BAK model is the US but even then, it is not by law but due to agreements among operators since the traffic flow is near-equal.
The history of interconnect usage charge has always been contentious and ends up in courts. Such a drastic cut when there’s heavy traffic imbalance is sure to be challenged in courts, which would be bad for the sector, Khullar said, adding that in a sector where changes are rapid, laying down a law that would be enforced in 2020 is not good.
The Reliance Jio would have savings of Rs 2,700 crore and KIE had estimated that Jio’s net interconnect bill currently runs at around Rs 4,500 crore per month. However, for Reliance Jio it would mean a saving of nearly 7,000-7,500 crore in its interconnect bill on a quarterly basis.