Sector Update: Telecom

Sector Update: Telecom
Comment E-mail Print Share
First Published: Fri, Jan 02 2009. 10 10 AM IST
Updated: Fri, Jan 02 2009. 10 10 AM IST
The Telecom Regulatory Authority of India (TRAI) is set to review interconnect usage charges (IUC) after they were fixed back in 2002-03 and not revised since then.
TRAI has set the ball rolling to revise IUC, particularly termination charge from Rs0.3/minute to Rs0.1/minute and carriage charge from Rs0.65/minute to as low as Rs0.16/minute.
IUC is payable by one telecom operator to others for use of their networks either for origination, termination or carriage of a call. Inter-operator calls constitute a major part of the total calls handled by the telecom network. These charges are important as they can transfer network costs between operators.
Although reduction in these charges would lead to a lower tariff for customers, as benefits would be passed on due to intense competition, it would dent the profitability of telecom operators mainly Bharti Airtel, Reliance Communications and Idea Cellular.
The move would prove beneficial to new operators since bulk of traffic originating on their low subscriber base would be terminating on the existing operators network, as the former have lesser network than the latter.
Our rough calculations show that the move could impact average revenue per user (ARPU) by 3-4% and earnings estimate by 2-2.5% for telecom operators like Bharti Airtel.
Comment E-mail Print Share
First Published: Fri, Jan 02 2009. 10 10 AM IST
More Topics: Stock Ideas | Money Matters | Equities |