Vodafone Idea says no TRAI intervention on tariffs may prompt more industry exits; Airtel for 2-year floor price

In its recent submission to the TRAI, Vodafone Idea flagged the 'deep financial distress' in the telecom sector, reflecting in unprecedented decline in revenues.

Press Trust of India March 05, 2020 19:18:59 IST
Vodafone Idea says no TRAI intervention on tariffs may prompt more industry exits; Airtel for 2-year floor price
  • Jio has termed the fixation of floor price for data services as vital for the health of telecom sector, and urged TRAI to continue the policy of forbearance for voice services

  • Over the last three years, half a dozen operators have exited by either merging their businesses with existing Telecom Service Providers or declaring bankruptcy, Vodafone Idea said

  • VIL said that among the telecom companies in the market, the public sector operator has been provided a significant financial assistance to sustain itself

New Delhi: Troubled Vodafone Idea has warned that the Indian telecom market may move towards a position of "virtual monopoly" if TRAI does not intervene in tariff fixation, while Airtel has cited "huge existential and financial crisis" to bat for fixation of floor price for two years.

Jio has termed the fixation of floor price for data services as "vital" for the health of telecom sector, and urged TRAI to continue the policy of forbearance for voice services, which it said is the preferred telecom service of the subscribers at the bottom of the pyramid.

Jio further said hike in floor price should be undertaken gradually and be fixed at Rs 15 per GB for now — against the prevailing Rs 9 to 12 per GB — and taken to Rs 20 per GB after six to nine months depending on the data consumption growth.

Vodafone Idea says no TRAI intervention on tariffs may prompt more industry exits Airtel for 2year floor price

Representative image. Reuters

In its recent submission to the Telecom Regulatory Authority of India (TRAI), Vodafone Idea— confronted with Rs 53,000 crore in AGR dues, of which it has so far only paid 7 percent — flagged the "deep financial distress" in the telecom sector, reflecting in unprecedented decline in revenues.

Over the last three years, half a dozen operators have exited by either merging their businesses with existing Telecom Service Providers (TSPs) or declaring bankruptcy, Vodafone Idea Ltd (VIL) rued.

"If the existing financial stress in the sector is not addressed within a short period, it could result in further bankruptcy and exit of TSPs from the market, leading to a state of virtual monopoly and absence of fair competition in the market," VIL said in its written submission.

The telco's comments were in response to TRAI's consultation paper on 'Tariff Issues of Telecom Services'.

Making a strong case for TRAI intervention, the company said to address the current financial stress, floor price must be considered for pure data plans, metered data plans and bundled usage plans; and fixed subscription charges for voice only, data only or voice and data subscribers.

Floor price should also be considered for unlimited usage plan on voice (say plan with 1,000 minutes limit) or data which will construe as a bundled plan; and off-net outgoing calls.

"Subject to above, other services, including on-net voice may continue to be under forbearance," Vodafone Idea said.

VIL said that among the telecom companies in the market, the public sector operator has been provided a significant financial assistance to sustain itself.

In a commentary which clearly underlines extent of the crisis in the sector, VIL said there is a "very strong likelihood" of further exits in the Indian telecom sector, and therefore it is likely that India may move towards a position of virtual monopoly.

Meanwhile, Bharti Airtel has said the industry is facing a huge existential and financial crisis, caused by cut throat competition due to 'below cost' pricing, and that operators have "bled".

The operators have a choice of raising tariffs unilaterally to correct the situation, but that is "easier said than done" given the extremely competitive nature of the market.

Airtel believes the industry needs an unprecedented intervention in terms of orderly conduct of the players.

"The only way to realise this orderly conduct for now is through the fixation of floor tariffs," it said.

Airtel said that after two years, however, the industry must go back to tariff forbearance.

"Our recommendation is to therefore have a clear time bound floor price which migrates back to forbearance at the end of two years. We believe that once industry health is restored, the Indian consumer will be well served by the innovation that tariff forbearance naturally provides," it said.

The Sunil Mittal-led company said the industry requires over Rs 1 lakh crore (excluding spectrum) in just 18-24 months to expand existing networks.

"For operators to themselves act sensibly and raise tariffs is very difficult given the brutal competitive intensity. We, therefore, believe that a temporary intervention by TRAI for a two year period so as to ensure orderly conduct has become essential to restore a dying industry," Airtel said.

The most critical need for the industry is to restore the financial health, Airtel said, adding that in its estimate even after the recent tariff hike of December 2019, the company will need an additional ARPU (Average Revenue Per User) of Rs 80 for 15 percent return on capital employed.

It said that there should not be any specific floor price for voice and voice price may be kept under forbearance.

"While we have recommended voice to be under forbearance, there are bundled packs which have unlimited voice. Hence, there will be a requirement to add a voice price component, in order to arrive at the overall floor tariff," Airtel said responding to Trai's question on whether there should be a limit on telcos to offer free off-net calls.

Airtel has recommended including Rs 60 per month towards voice charges in case of bundled pack with unlimited voice.

"No limit to be applied on TSPs to offer free off-net minutes. Any charging of calls, outside the unlimited bundle pack, may be left to the discretion of the operator given the broader over-arching recommendation of tariff forbearance on voice," it said.

It has opposed any need for price ceiling, citing among other factors the competitive market.

Jio, on the other hand, has said that fixation of floor price for data services is vital for maintaining the health of the telecom sector and delivering best value to Indian consumers.

"We therefore submit that the data floor should be fixed on the basis of realized revenue from data services. As mentioned by the Authority, the realized revenue ranges from Rs 9 to 12 per GB. The authority should target to improve the realisation at least to Rs 20 per GB," Jio said.

Floor should be prescribed for data service for all categories —that is corporate, consumer and segmented, it said.

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