The Telecom Regulatory Authority of India (TRAI) is set to re-examine regulations for licence fee, spectrum charges, universal services obligation (USO) charge and termination rates, say sources.
The TRAI review, sources add, is in light of the increasing competition in the sector, which may weigh down on its profitability. Additionally, the TRAI will also review inter- and intra-circle roaming rates and SMS charges.
In an interview with CNBC-TV18, Manoj Kohli, CEO and Joint MD, Bharti Airtel, spoke about TRAI’s recent move, the general scenario in the telecom industry and his expectations from the government to ensure new subscriber growth for industry.
Here is a verbatim transcript:
Q: The TRAI will begin a process of examining the entire spectrum of charges, interconnect fee, spectrum fee, roaming rates, SMS tariffs and this is going to pan out as a consultative process. How would you react to that development as and when it is formally announced?
A: This is a very positive development because as we have been saying that 31% of the Re 1, which the customer pays is going to taxes and levies is one of the highest tax structure in the world for telecom.
Last year, the finance minister had organised a small committee to review the taxes and levies and it is good that finally the TRAI is taking up this cause and if these taxes and levies can be moderated, I am sure that the customer can be passed on the benefit immediately.
Q: In terms of your expectations from such an exercise, would you want to go into some preliminary details of what would your specific expectations be as one of the largest operators with perhaps highest capex ongoing at this point of time?
A: We believe that the tax structure – the tax load on the customers especially the low end customers, rural customers, customers who pay us Rs 50 a month, Rs 100 a month, I think 31% is very arduous on those customers.
So if TRAI and the Union government are able to review this, bring it down to some reasonable level, I think it will be welcomed by the customers too.
Q: What would a reasonable level be?
A: I can’t give a target but definitely 31% is very high.
Q: Tariff wars, you surprised everybody for some time saying that you will not react to this per second billing, and then actually doing it. And today there is one CDMA operator, MTS who has launched a half paise per second programme in 8 circles that it operates in. What does this really mean?
A: Because we have a large base of 115 million customers, we analyse the customers, we analyse their feedback from channel partners, and then we take a decision. We do not take a decision because we have a large revenue base. We do not take a decision as a reaction to somebody.
Many times we don’t react to competition because there is no need to. Customers come to us not for tariff, they come to us for the trust of our brand, for the network coverage, for the network quality, quality of our service, innovation and new product etc. So in this case also I will say that new operators keep on doing these one paise, half paise etc. We do not need to react to everything. Customers are looking at many more benefits beyond tariff.
Q: How would you react to this growing criticism which says that SMS tariffs are actually benchmarked far higher than cost and that incumbent operators are refusing to pass on the benefits to customers?
A: I do not agree with this argument because I believe that SMS tariffs in India are the lowest in the world, much lower than voice tariffs. Voice tariffs are anyway the lowest in the world. As the competitive intensity goes up, these tariffs tend to go down. So, I do not think any brand, present incumbent operators are trying to hold the prices. We are being competitive and customers are really delighted by the present tariff rates.
Q: In terms of consolidation, again something that you mentioned in one of your last public interactions, you spoke about the fact that consolidation is going to happen. What sort of general scenario can you map out at this stage if not specifically for Bharti Airtel but overall for the sector?
A: The general scenario is that the present level of competitive intensity is not sustainable beyond a short period. Clearly some of these new players and some of the present players who are making losses will have an unviable business case. At some point of time they will realise that internally and either close down or be consolidated. Till that happens, I think this kind of tariff activity may continue.
Q: Do you think it is time for the government to announce a fresh telecom policy? We had in ‘99, 2003 and it is perhaps quite a few years?
A: That is a prerogative of the government of India. So, I really can’t say much. I can just say that long-term viability of industry is very important. This sector has been the pride of India. We have taken the customer coverage from zero to 500 million in the last fifteen years and now we are planning to take it from 500 million to 1 billion in the next five years.
So, the road and the roadmap to 1 billion should be very orderly, well planned by the government of India, whether it is spectrum or tariff or viability. If the sector is viable, the growth will happen. If the sector is viable then the next 2 lakh villages will be covered and the balance 17% of population will be well covered, and finally they will get quality of services.