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DoT not to exclude portability charges from telcos’ revenue

DoT not to exclude portability charges from telcos’ revenue
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First Published: Sun, Mar 14 2010. 11 29 PM IST
Updated: Sun, Mar 14 2010. 11 29 PM IST
New Delhi: The department of telecommunications, or DoT, has denied a request by the lobby group Cellular Operators Association of India (COAI) to let telecom operators exclude the money they earn by “porting” mobile numbers from their adjusted gross revenue (AGR), a part of which they pay the government, two DoT officials said.
India is expected to begin implementing the so-called mobile number portability (MNP) service in May to allow mobile phone users to “port”, or retain, their numbers when they change their telecom operator. The system will work by rerouting calls on these numbers from the original operator to the new one.
Two MNP service providers, Telcordia Technologies Inc. and Syniverse Technologies (India) Pvt. Ltd, will maintain a database of numbers that have shifted from one operator to another to allow for seamless rerouting of calls. Telcos can run their own databases of such numbers, or “dip” into each other’s or the MNP service providers’ databases.
Porting involves three kinds of transaction charges. Mobile phone users will pay the “porting charge”, fixed at Rs19, to the operator they are shifting to. Telcos will pay the “per port transaction charge” to MNP service providers for processing a porting request. They will also pay the “dipping charge” to another telco or to the MNP service providers if they utilize their query search databases.
COAI had said that porting and dipping charges that telcos receive will ultimately go to the MNP service provider’s kitty, and so should not be included in the adjusted gross revenues of telcos. Telcos pay 6-10% of their adjusted gross revenue as spectrum usage charge and 2-5% as licence fee to DoT.
“The telecom firms will not get to keep this money as it will go to the MNP operator. Then what is the logic of the money contributing to the AGR (adjusted gross revenue),” said T.R. Dua, officiating director general, COAI. “We had written to DoT asking them to clarify this.”
But a senior DoT official justified the decision to include the income in telcos’ revenue.
“They have the option of either having their own database or dipping into the MNP operator’s database. The operators who chose to dip will be bearing an acquisition cost. Why should this be written off as an expenditure and not included in the AGR?” said the official on condition of anonymity as he is not authorized to speak to the media.
Another DoT official confirmed the move. “The telcos will be going after higher Arpu (average revenue per user) generating consumers and, therefore, it is far more profitable for them when a subscriber comes to them. As per the licence agreement that they signed, it was agreed that all revenue would be added to the AGR,” he said.
India had 545.05 million wireless subscribers after adding 19.90 million in January, taking overall teledensity to 49.5%. The country has the fastest growing and second largest telecom market in the world after China.
The Telecom Regulatory Authority of India has estimated porting rate to be at 10% in the first 15 months, and 7%, 6% and 5%, respectively, over the next three years.
A Mumbai-based analyst, who did not want to be named, said porting could add Rs100 crore to telcos’ AGR every three months, assuming that 6-8% of India’s mobile subscriber base favoured a change of network in that period.
“The Indian market has 13 telecom operators, with around 95% of the market being prepaid. There is no other comparable market in the world,” the analyst said.
MNP has been delayed twice as operators were not ready to implement it. More recently, it has led to a tariff war, with each operator trying to expand its subscriber base to lessen the impact of users leaving its network once MNP is introduced. Telcos are expected to carry on the tariff war for at least six months after that,
But it has brought tariffs down to levels now viewed as unviable. “It all depends on how much their books can bleed, but the war will end with consolidation as the telcos will be easy targets for acquisition,” the Mumbai-based analyst said.
shauvik.g@livemint.com
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First Published: Sun, Mar 14 2010. 11 29 PM IST