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Airtel, Vodafone & Idea race against time to ready case against IUC cut

The top carriers have a small window – barely a week – before some courts take a break next week and resume much after the implementation date of Trai order.

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NEW DELHI: Top telecom operators are racing against time to build a strong case against the regulator’s decision to lower the interconnect usage charge (IUC) by 57% to 6 paise. They plan to move court claiming ‘irreverisble damage’ to stall the Telecom Regulatory Authority of India (Trai) plan, which comes into effect on October 1.

An industry executive said that the case or cases need to be filed by Friday latest to be heard on Monday, which is the earliest possible day to get a hearing, and carriers need to decide which of the high courts to approach. “They have to make a strong case as they will get just one shot at this”.

The top carriers have a small window – barely a week – before some courts take a break next week and resume much after the implementation date of Trai order.

“Telcos will go to the court keeping in mind that they have to get a stay and prove to the court that irreversible damage will happen if IUC of 6 paise is allowed in the way that it has been said in the regulation,” said Rajan Mathews, director general of Cellular Operators Association of India (COAI), which represents carriers in India.

Two senior industry executives further said that the companies were thoroughly scrutinising their strategies, especially the claims made by Trai around transparency, before moving court and will push to be heard before the next month begins.

“The strategy will be to oppose the regulation as one petition, seeking it to be struck down and the conjoined plea would be to grant an immediate stay on the regulation, which is going to financially impact the carriers,” one of the executives said.

IUC is a charge, also known as mobile termination charge, paid by a mobile operator originating a call to the network where it terminates.
Bharti Airtel, Idea Cellular and Vodafone India didn’t respond to emails seeking comment.

Idea on Thursday joined Vodafone India and Bharti Airtel in slamming Trai for slashing the fee to 6 paise a minute from 14 paise and further to zero from January 1, 2020. The industry in 2020 is supposed to move to a bill and keep (BAK) regime where carriers don’t pay anything to each other for carrying calls, as opposed to the prevailing calling party pays (CPP) regime.

In a statement on Thursday, Idea said it expects the Trai order to “be recalled in toto,” adding that the decision has ignored high spectrum prices and will further hurt an already financially stressed industry.

Idea Cellular warned that the drastic reduction in the prevailing IUC, and the proposed migration to BAK regime from 2020, will further expose the players to predatory and anti-competitive pricing tactics and disturb the long-term competition structure of the industry, turning it into a near monopoly.

“In an environment of ten-fold induced traffic asymmetry, this is a regulation driven cross-subsidy among competing operators whereby one operator is passing the burden of terminating its voice traffic on to other operators,” the company added.

According to industry estimates, No. 1 telco Bharti Airtel would lose around Rs 2,000 crore a year from the lower IUC. For Vodafone India and Idea Cellular, ranked second and third, the annual loss would be around Rs 1,500 crore and Rs 1,200 crore, respectively. However, Jio is set to save Rs 5,000 crore, while Reliance Communications and Aircel will benefit by a marginal Rs 250 crore each.

The top three are net gainers under CPP since they have more than 60% of the subscriber base and thus have more calls terminating on their networks compared with calls originating from them. Jio, a new entrant, has most calls going out from its network and terminating on incumbents’ network.

Vodafone has already challenged Trai’s 2015 reduction of IUC to 14 paise from 20 paise, in the Delhi High Court, the same year. Now, the top three telcos are expected to move court against the latest cut as well. Trai on the other hand has backed its decision to cut IUC and has said that it will defend the move if challenged in court.

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