Two of India’s Big Three have filed a legal challenge against the Telecom Regulatory Authority of India’s decision to significantly reduce interconnect charges ahead of scrapping them altogether.
Market leader Bharti Airtel and number three Idea Cellular have called on the Bombay High Court to block the regulator’s plan to reduce termination fees. TRAI recently announced plans to slash the rates from INR0.14 ($0.002) to INR0.06 from 1st October, and abolish the charges altogether from 1st January 2020.
Following TRAI’s announcement, number two player Vodafone India also claimed it would take legal action to prevent the cuts. However, TRAI claims that the lower fees will provide operators with more flexibility in terms of pricing, thereby benefiting consumers.
The country’s three largest operators collectively account for over 60% of India’s total subscribers. The termination rate cuts will affect them disproportionately as more calls are terminated on their networks than initiated. The operator with the highest number of calls terminating on its rivals’ networks is Reliance Jio.
India Ratings & Research has forecast that the Big Three will see a 4%-5% drop in EBITDA as a result of TRAI’s cuts to termination charges. Meanwhile, Jio will be able to save as much INR40 billion ($625 million) per year, which could see the operator offers its services for even lower tariffs.
Since its debut in the market over a year ago, Jio has provided voice and data for free via its nationwide 4G network. The operator is widely viewed as the cause being a massive drop in operator profits over the year, as providers had to slash data rates in order to compete.
