Airtel Loses Out to Jio As TRAI Cuts Mobile Call Connection Costs

The new call termination charge will be applicable from 1 October 2017.

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• Mobile-to-mobile termination charge reduced to 6 paisa per minute from 1 October 2017
  
• For other types of calls, the termination charge will remain zero.
  
• Termination charge for all types of domestic calls will be zero from 1 January 2020.
  

India's telecom regulator has cut the fees operators pay for cross-network calls by more than half, a move which was strongly opposed by the biggest player Bharti Airtel Ltd as it benefits the newest entrant Reliance Jio Infocomm Ltd.

Interconnection charges from mobile to mobile have been cut to 6 paise per minute from 14 paise per minute effective from 1 October, according to a press release by the Telecom Regulatory Authority of India (TRAI). The interconnect usage charge will completely go from 2020.

A telecom operator pays interconnect usage charges, or IUC, whenever a rival provides access to its network to complete a call. Mobile termination rate, or MTR, is a type of IUC. It’s payable for calls originating from one mobile network and ending at another. IUC on mobile-to-fixed line (like Vodafone to MTNL) and fixed line-to-fixed line (like BSNL to MTNL) calls had already been revised down to zero in March 2015.

The regulator's decision follows a consultation paper it floated in 2015. Older operators like Bharti Airtel Ltd and Vodafone India Ltd had demanded an increase in such charges. Reliance Jio had said it should be abolished. Airtel had argued that Jio’s push to abolish call connect charges would “kill the industry” and cost telecom operators nearly Rs 15,000 crore to Rs 20,000 crore every year.

Larger players like Bharti Airtel, with their deeper rural networks and premium pricing, typically see significantly higher traffic of incoming calls than outgoing, according to a report by Kotak Institutional Equities. This means they are the net earners of interconnect charges. An aggressive player like Reliance Jio, with free voice calling, is a net payer.

(This article was originally published in BloombergQuint)