Free market economic dictates that the consumer should stand to benefit from competitive forces

Telecom regulator, Trai decision to slash the interconnect usage charges (IUC) by 57 per cent to six paise per minute on all mobile calls is a welcome move as it benefits millions of consumers. India’s sunrise sector has also proved to most litigious and once again the newbie is going to face a legal challenge from the incumbents. Mired in controversy, various entities have been smothered to death in the years gone by, a few more await their tryst with the flame. Competition has to benefit the end user, that is the cornerstone of free market economics. 

Telecom regulator deserves kudos for being bold with the decision as the spirit of free enterprise must translate into benefit for the consumers irrespective of whether its telecom, insurance, consumer goods or commodities. The whetstone of competition should remain the only place to sharpen your skills.

If the consumer is the ultimate beneficiary in the slug fest between the four top telecom players Reliance Jio, Bharti Airtel, Vodafone and Idea Cellular, so be it. TRAI also has the onerous responsibility of getting the full benefit of lower IUC passed on to the telecom consumers on both voice and data usage. The telecom regulator may have to stick to the 2020 deadline to fully phase out the IUC even on landline to mobile and calls between two fixed line numbers.

There’s no reason why Sunil Bharti Mittal, Kumar Mangalam Birla and Vodafone should object to the TRAI decision though it means lower profits for their companies. There’s no denying that Reliance Jio will save Rs 3,800 crore on lower IUC as about 34 million calls originating from its network end on the rivals end. When all forms of IUC are phased out, total revenue implication for the telecom industry would be about Rs 6,700 crore.

Cellular Operators Association of India (COAI), which has virtually become a pocket borough of Bharti–Idea–Vodafone , must refrain from claiming undue profits at the cost of customers who are already struggling with call drops, data gaps, unsolicited activation of global roaming and shoddy services.

These three companies that had cornered major chunk of spectrum across frequencies appear to have no case whatsoever. But, as a consequence, Reliance Jio operations may turn profitable in the second year of operations itself.

It is only after Reliance Jio made its price warrior move that Bharti, Vodafone and Idea Cellular slashed tariffs on both voice and data services. Till then, these players profiteered at the cost of consumers.  A word of caution would be that the competition between top four players must be healthy, within the permissible norms and not get dirty.

In a few months, when the traffic movement reverses to end equally on networks, then Reliance Jio will still benefit from the decision of TRAI that committed to a  phase out of IUC before the Supreme Court way back in October 2011. In fact, the phase out has already been delayed by about three years.

Let’s not forget that when the SMS termination charges (STC) was slashed in 2013 by then TRAI chief Rahul Khullar, Bharti Airtel was the biggest beneficiary  with about a Rs 3,000 crore saving in revenues. The 10-paise STC prevalent even today must be phased out to make telecom tariffs more open, transparent and consumer friendly.

Only key issue is the debt build-up reflected in the books of old telecom players that is often cited by COAI director general Rajan Mathews as a valid reason for high tariffs. No telecom player including Reliance Jio has invested its own resources or profits to fund expansion of the telecom networks. Most players have insulated themselves by shifting the entire risk of investments on to books of both public sector and private banks. Even if the companies made profits all along, these were never deployed to retire debt availed in the last one a half decades.

Today, for telecom players to play dirty at the cost of consumers and banks is unacceptable. TRAI will have to find ways to reduce the banks exposure to telecom companies while protecting consumers’ interests in parallel.