TRAI slashes call connection charge to 6 paise, to phase out IUC by January 2020

The Telecom Regulatory Authority of India (TRAI) on Tuesday cut termination charge for all mobile to mobile calls to 6 paise per minute from 14 paise. The revised charge, effective October 1, will be reduced to zero from January 1, 2020. For calls between landlines, between mobiles and landlines and vice versa, this charge will continue to be nil.

Termination charge is part of the interconnect usage charges which also includes origination charge and carriage charge. These are the charges payable by the originating service provider, whose subscriber originates the call, to the terminating service provider, in whose network the call terminates. The charges are naturally collected by the originating service provider from its customer.

The more than halving of the mobile termination charge will not go down well with the incumbent operators, sitting as they are on a cumulative debt of Rs 8 lakh crore. Most certainly, their shares will be under pressure Wednesday. Bharti Airtel share closed 0.5% lower at Rs. 394.70 on BSE today though Idea Cellular posted similar gains in percentage terms to end the day at Rs 83.

The regulator’s tariff order is good news for Reliance Jio Infocomm though the Reliance Industries subsidiary would have preferred a scrapping of the termination charge altogether. Reliance Industries share closed 0.6% down at Rs 840.

As more and more telecom operators shift their network to 4G technology, the mobile termination is living on borrowed time. At its peak – in 2003 -- the mobile termination charge was 50 paise per minute. A 4G network transfers voice as a data packet which occupies little bandwidth in a network that is more suited for carrying data. Reliance Jio is currently the only telecom operator whose entire network is built on the latest 4G LTE (long term evolution) technology.

“. . .for some of the operators even today, the main revenue stream is voice, that is true. But that revenue stream is already being taken away. Even with the current situation of IUC, more and more OTT services, they are taking away the voice revenue as well,” Bharat Sanchar Nigam’s former Chairman and Managing Director RK Upadhyay had said while participating in a CNBC-TV18 panel discussion last month.

In 2015, TRAI had slashed IUC to 14 paise per minute from 20 paise per minute. On August 5, 2016, had issued a consultation paper which stated that the industry may need to effectively scrap IUC as telecom services of the future will be dependent on IP-based networks.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd