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India slashes mobile interconnection fee

India’s top telecoms players with the highest number of subscribers tend to gain from the fees. (Reuters)
MUMBAI: India’s telecom regulator more than halved a fee mobile carriers pay for calls made from one network to another, dragging down shares of bigger operators such as market leader Bharti Airtel that are likely to be hit hard by the move.
Operators in India do not charge users for incoming calls, but the carrier from whose network a call originates pays a fee to the network that receives the call. The top players with the highest number of subscribers tend to gain from the fees.
The Telecom Regulatory Authority of India (TRAI) late on Tuesday said interconnect usage charges (IUC) for mobile calls will be cut to 0.06 rupees a minute from 0.14 rupees, effective October 1. The fee will be scrapped from 2020.
Morgan Stanley estimated the fee cut could lead to an about 40 percent plunge in Bharti Airtel’s annual profit, adding that Reliance Jio Infocomm would be the key beneficiary of the move.
Reliance Jio, backed by India’s richest man Mukesh Ambani, has disrupted the highly competitive telecoms sector with free voice calls and cut-price data. Being a new player, it has relatively more calls made from its network.
Jio had questioned the interconnect charges, saying that rival operators had already recovered their investments.
Bharti Airtel and Vodafone’s India unit, the market’s second-biggest carrier, said they were disappointed by the fee cut. Vodafone said it was considering its options, warning it could hurt investments on covering rural areas.
Shares in Bharti Airtel fell as much as 6 percent, while third-ranked Idea Cellular shed up to 7 percent.
Reliance Industries, the parent of Jio, rose 4 percent in intraday trade versus the wider Mumbai market that was up a slight 0.1 percent.
Jio and Idea did not respond to requests for comment.
The Cellular Operators Association of India, which counts Bharti, Vodafone and Idea among its members, said carriers would take a severe hit from the reduction to interconnect fees.
“It’s going to exacerbate the financial condition of the industry,” said the association’s director general, Rajan Mathews, referring to falling profits and high debt resulting from costly airwave auctions and a brutal price war.
The sector is already seeing a consolidation, with Vodafone India and Idea having agreed a merger, while smaller carriers Reliance Communications and Aircel are combining their mobile operations.

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