Telecom firms ask Trai to fix floor price for voice, data services to counter Reliance Jio
Since its launch in September, Reliance Jio has managed to sign on over 100 million subscribers, on the back of free offers and competitive tariff plans
New Delhi: Some telecom firms have asked the Telecom Regulatory Authority of India (Trai) to fix a minimum floor price for voice and data services in an attempt to stop Reliance Jio Infocomm Ltd’s (Jio’s) disruptive tariff plans and free offers.
Trai chairman R.S. Sharma said over the phone that this was one of the ideas offered by telecom firms to make “the telecom business sustainable”. Other proposals included a reduction in the licence fee and spectrum usage charge, and extension of the deferred spectrum payment period, he added.
According to Sharma, Trai does not guide on pricing. “We have had a forbearance regime (on tariffs) for the last 14 years,” he said, adding that the agency will have to think about this.
Jio did not respond to an email seeking comment. Rajan S. Mathews, director general of the Cellular Operators Association of India, did not respond to phone calls and text messages.
Since its launch in September, Jio has managed to sign on more than 100 million subscribers, largely on the strength of its pricing strategy (its services were free till the end of March, and even now, most of its customers do not pay anything for voice calls).
Jio’s impact has been such that the aggregate revenue of Indian telcos fell for the first time since 2008-09 to Rs1.88 trillion in 2016-17 from Rs1.93 trillion the previous year, according to brokerage CLSA. This is likely to decline further to Rs1.84 trillion in 2017-18.
Rivals Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd have responded by lowering prices to retain customers but that has dented their revenue. Jio’s onslaught led to a 10% decline in the revenues of large firms such as Airtel, while in the case of smaller ones, the decline has been as high as 22-24%, according to a Mint analysis.
Sharma of Trai admitted that the concept of a floor price may be contrary to the regulator’s stance of forbearance on tariffs, but said the minimum price issue will have to be “deliberated” on. He said that the telcos making the demand had argued that offering tariffs which are lower than costs over a period of time could harm the industry.
The Economic Times reported on 12 June that Airtel’s adjusted gross revenue for the three months ended March was down 9.9% compared with the preceding three months and Vodafone India’s by 12.6%. Telcos pay revenue share to the government on the basis of this, so a fall in adjusted gross revenue could hurt the government as well.
An inter-ministerial panel led by a senior official in the telecom ministry on 12 June started its hearings on a possible bailout of debt-laden telecom companies even as most telecom firms increased the pitch of their demand for one.
India’s telcos are loaded with debt—around Rs4.85 trillion at the end of December 2016—and face the burden of payments due to the government for spectrum (close to Rs3 trillion). They also face intense competition, with the average revenue per user of most falling sharply since the launch of Jio’s services.