Revenues of Indian telecom companies could decline further in FY18, as the Telecom Regulatory Authority of India looks set to announce the new interconnect usage charges (IUC) in 3-6 months.
Interconnect charges are those that telcos pay to other operators for calls terminating on their networks. Currently, interconnect charges are at 14 p/minute and the regulator has proposed to bring this down to zero eventually. At a telecom conference organized by Motilal Oswal, senior officials of Trai conveyed that IUC would reduce gradually and new revised rates would be announced in the next 3-6 months. IUC accounts for almost Rs 25000 crore to revenues of telecom operators with a lion's share being cornered by the three large operators.
TRAI had issued a consultation paper last year on interconnection usage charges (IUC) with a view to lower the same from FY18. The regulator has proposed phasing out this charge gradually as operators migrate to IP-based networks. The regulator indicated that over the long term, IUC should decline to zero. The issue of call drops too has been more or less resolved following spectrum refarming and network rejig. On net neutrality the regulator’s view is to curtail operators from offering discriminatory pricing.
On the road ahead, Cisco estimates that data consumption in India will increase significantly to 4/5 GB per month, which is why capacity has to increase. The brokerage expects data revenues to grow even as voice revenues from voice decline.
The battle ultimately will be between Airtel and Reliance Jio as they both are jostling to build significant data capacity to meet demand, which is expected to explode over the next few years. Bharti Airtel’s data capacity is currently 8-10 times its current consumption and it has 110,000 broadband towers with 170,000 sites. And the telco has higher data capacity in metros and tier A cities, which comes close to Reliance Jio. Together Bharti and Reliance Jio hold over 40 percent of the spectrum.
The report by Motilal Oswal also indicated that the merger of Vodafone and Idea would be complete in 9-12 months. The merged entity would have one year from the effective date of merger to comply with the revenue and spectrum market share thresholds. With RJio’s commercial launch in most circles, the revenue market share could get adjusted below the 50 percent threshold.
Disclosure: Reliance Industries, which owns Reliance Jio, also owns Network18, which publishes Moneycontrol.com.
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