Vodafone flags concerns over further cut in mobile termination charges
Mumbai: British telecom major Vodafone has sought a reduction in interest rate on deferred spectrum payment and also expressed concerns over risks associated with a possible cut in mobile termination charges (MTC).
“We hope the IMG (inter-ministerial group) will recommend a reduction in the interest rates for deferred spectrum payments to 6.25% in line with the improved macro- economic trends and an increase in the period of payment for spectrum,” Vodafone Group chief executive Vittorio Colao said.
“We are seriously alarmed to see reports that the regulator is considering a reduction in MTC at a time when the industry is facing such immense hardships,” he said in a letter written to Union telecom minister Manoj Sinha.
Vodafone is the second biggest telecom firm in the country and is in the process of merging with its immediate rival Idea Cellular, which is being seen as a consolidation triggered by the launch of Mukesh Ambani-led Reliance Jio.
“Any reduction in MTC risks large scale site shut-down of already unprofitable sites in rural India and which would greatly diminish the population coverage of mobile telephony,” it said, adding that at present the industry covers 97% of the population.
Attributing the success in taking telecom services to rural areas to the adoption of calling party pays (CPP) norm in 2003, Colao said nowhere in the world do bill and keep (BAK) and CPP regime co-exist, as proposed by Reliance Jio.
Stating that the current MTC of 14 paisa is “below cost”, Vodafone said a further cut risks hitting the companies that have invested to build the industry. He added that consumers pay for incoming calls in BAK countries, which is unrealistic for India.
The letter also said that Reliance Jio’s claims of having a 70% advantage on costs as compared to entrenched operators has “no evidence” and alleged that Reliance Jio is incurring higher costs on both employees and infrastructure.
Claiming that Reliance Jio has assumed continued growth of an “implausible level of paid traffic”, Colao said the present traffic levels are a result of Ambani-led company’s extreme promotional activity and “generated by incurring huge losses”.
Within a few months of its launch, Reliance Jio has managed to ramp up its subscriber base to over 100 million with its aggressive offerings. “It is undesirable for a critical core industry like telecom to be regulated based on the ambition of a new operator with no history of financial sustenance,” the letter warned.
Seeking an urgent intervention in the matter, it said a further reduction in MTC would destabilise the sector, defeat government’s rural coverage objectives and cause huge inconvenience to citizens, in particular in rural parts. An email seeking comment from Reliance Jio on the letter was not answered. The Vodafone Group CEO’s letter also mentioned the firm’s commitment to the government’s ‘Digital India’ vision.