TRAI slashes mobile interconnect fee, Reliance stocks zoom

The top players with the highest number of subscribers tend to gain from the fees. Photograph:( Reuters )

WION Web Team Mumbai, Maharashtra, India Sep 20, 2017, 08.05 AM (IST)

In a setback to big mobile phone operators, the Telecom Regulatory Authority of India (TRAI) on Tuesday more than halved the fee mobile carriers pay for calls made from one network to another.

Interconnect usage charges (IUC) for mobile calls will be cut to 0.06 rupees ($0.0009) a minute from 0.14 rupees, effective October 1, TRAI announced. The fee will be scrapped from 2020.

Incoming calls have been made free by mobile phone operators in India, but the carrier from whose network a call originates pays a fee to the network that receives the call. The top players with the highest number of subscribers tend to gain from the fees.

The move by the telecom regulator will cut into shares of bigger operators such as market leader Bharti Airtel and Idea Cellular. Morgan Stanley estimated the fee cut could lead to an about 40 per cent dip in Bharti Airtel's annual profit, Reuters reported.

Being a new entrant, Reliance Jio  Infocomm has relatively more calls made from its network and will be the main beneficiary from the move, Morgan Stanley said.

Backed by India's richest man Mukesh Ambani, Reliance Jio has disrupted the highly-competitive telecoms sector with free voice calls and cut-price data. 

It had questioned the interconnect charges, saying that rival operators had already recovered their investments.

Bharti Airtel and Vodafone Group Plc's India unit, the market's second-biggest carrier, said they were disappointed by the fee cut. 

Vodafone said it was considering its options, warning it could hurt investments on covering rural areas.

Shares in Bharti Airtel fell as much as 6 per cent (Rs 370) but recovered by noon to Rs 395.

Third-ranked Idea Cellular fell up to 7 per cent. 

The stocks of Reliance Industries (RIL), the parent of Jio, hit a new high of Rs 872 by noon. The shares were up 2% at Rs 859 at around 9:30 am.

Jio and Idea did not respond to requests for comment.

The Cellular Operators Association of India, which counts Bharti, Vodafone and Idea among its members, said carriers would take a severe hit from the reduction to interconnect fees.

"It's going to exacerbate the financial condition of the industry," said the association's director general, Rajan Mathews, referring to falling profits and high debt resulting from costly airwave auctions and a brutal price war.

The mobile phone operations sector is already seeing a consolidation. Vodafone India and Idea having agreed to a merger. Reliance Communications and Aircel are combining their mobile operations.
 

Story highlights

India's telecom regulator more than halved a fee mobile carriers pay for calls made from one network to another, dragging down shares of bigger operators ||Reliance Jio Infocomm will be the key beneficiary of the move, since, being a new player it has more calls from its network