Telecom - TRAI Prunes Termination Charges :: Edelweiss

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The Telecom Regulatory Authority of India (TRAI) has reduced Termination Charges (TC) for all calls originating from and terminating to wireless networks to INR0.14 per minute from INR0.20 per minute. As larger operators are net receivers of these charges, it will have a marginal negative impact on incumbent operators. Ceteris paribus, we expect this change to negatively impact FY16E EBITDA of Bharti Airtel (Bharti) and Idea Cellular (Idea) by 0.6% and 1.2%, respectively. Although the EBITDA impact is not material, it will improve new operators’ pricing flexibility, leading to headwinds for rate improvement. Apart from changes in mobile TC, TRAI has also done away with TC for calls originating from or terminating to wireline networks to promote penetration of the wireline networks, given its utility in increasing internet penetration. The new TC will be effective from March 1, 2015.

Key highlights of recommendations

TRAI, as a step towards the “Bill and Keep” model, has changed the current structure of TC. Key highlights are:

• Mobile TC for all calls originating from wireless networks have been reduced to INR0.14 per minute from INR0.20 per minute.
• All local and national long distance calls from wireless to wireline or wireline to wireline or wireline to wireless will have ‘zero’ TC. This is expected to lower calling rates for calls originating from or terminating to wireline networks. This is expected to lead to increased adoption of the wireline networks, which then can become an effective vehicle for delivery of high speed internet.
• TC for international incoming calls has been raised to INR0.53 per minute from INR0.40 per minute. This increase can be attributed to disincentivising international incoming traffic, which is significantly more than the international outgoing calls from India.

LINK
https://www.edelweiss.in/research/EdelFlash-Telecom--TRAI-Prunes-Termination-Charges/28451.html