Home / Industry / Telecom /  Call rates may fall as Trai cuts interconnection usage charges

New Delhi: In a move that could lead to lower call rates, the Telecom Regulatory Authority of India (Trai) on Monday reduced interconnection usage charges to 14 paise per minute from the current 20 paise.

Interconnection usage charges are payable by a telco whose subscriber makes a call, to the telco whose subscriber receives the call. The charge is essentially payable by the first telco for using the second telco’s network. This means older operators with more subscribers and bigger networks tend to make money from this charge, while smaller operators end up paying a charge, on a net basis.

The move is likely to be welcomed by smaller and newer operators, while the larger telcos are likely to contest the new tariff.

Analysts had mixed reactions on the decision.

“This move of Trai is very positive and healthy sign for the telecom industry. However, since the tariffs in India are lowest in the world, and in view of high spectrum costs and taxes faced by the telecom operators, they may not be able to pass on the benefit of reduced termination charges to the consumer in full," said Hemant Joshi, partner at Deloitte Haskins and Sells.

A Mumbai-based telecom analyst with a multinational brokerage firm said, “The operators will have to pass on the reduction, as smaller operators will have room to reduce tariffs and eat into customer market share. It is difficult to say that there could be a tariff war again as the overall debt of the sector is a little high."

Calls originating from and ending in land phones will not have any interconnection charges, Trai added.

“To promote investment in, and adoption of, wireline networks, so that they may become an effective vehicle for the delivery of high-speed Internet in the country, the Authority has decided to prescribe FTC (fixed termination charge) as well as MTC (mobile termination charge) for wireline to wireless calls as zero," Trai said in a statement on the new interconnection charges.

Termination charges for international incoming calls have been increased to 53 paise per minute, from the current 40 paise.

The number of fixed line connections in the country has been falling for several years now. The mobile subscriber base at the end of 2014 reached an all-time high of 943.9 million, while landline connections are only 27 million.

State-run Bharat Sanchar Nigam Ltd (BSNL) has the most landline phone subscribers with 62.71% market share, followed by state-owned Mahanagar Telephone Nigam Ltd (MTNL) with 13.04%. Others with fixed line services include Bharti Airtel Ltd with 12.55% market share, Tata Teleservices Ltd with 5.98% and Reliance Communications Ltd (R-Com) with 4.39% market share. Videocon’s Quadrant, Vodafone India Ltd and Sistema Shyam TeleServices Ltd together account for 1.2% market share.

In the mobile services segment, Bharti Airtel is leader with a 23.01% market share followed by Vodafone with 18.93%, Idea Cellular Ltd 15.95%, R-Com 11.26%, BSNL 8.62%, Aircel 8.33%, Tata Teleservices 7.01% and Uninor 4.62%. Sistema Shyam, Videocon Telecom and MTNL together account for about 2% mobile services market share.

Trai reviews the interconnection charges every two-three years, but was unable to do it since the current interconnection regime came into place in April 2009, as the issue was pending in the Supreme Court. The new charges are a consequence of the consultation process started by the telecom regulator in November 2014.

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