Trai adds fixed-fee rider to 'free' mobile roaming plan

Source : BUSINESS_STANDARD
By : BS Reporter
Last Updated: Tue, Jun 18, 2013 04:26 hrs
The sun rises behind a communications tower in New Delhi

Putting a damper on the hopes of the country's 867 million mobile users - 112 million of them already availing of roaming services - the Telecom Regulatory Authority of India (Trai) on Monday shot down the idea of making roaming fully free, calling it impractical. The regulator, instead, lowered the cap on mobile rates for users in non-home circles by 29-57 per cent and fixed a ceiling on rates for outgoing SMSes.

The Trai move has come in spite of the government last year clearing a policy to move towards the free-roaming regime. Many see it as an attempt to assuage telcos' fear that they might together have to take a hit of Rs 13,000 crore a year due to the government's free-roaming plan. Bharti Airtel, Vodafone and Idea Cellular account for 80 per cent of the 112 million consumers currently using roaming services.


The telecom regulator directed telcos to offer customers two alternatives. In the first, consumers pay a fixed upfront charge (to be decided by operators) to avail of unlimited incoming roaming calls for free. In this option, they continue to pay for outgoing roaming calls on a par with what they pay in their home circles. In the second option, they are not charged any upfront fee but they have to pay for incoming calls, while outgoing call rates are on a par with those in their home circles. The new regime will be implemented from July 1 and reviewed after a year.

Trai Chairman Rahul Khullar said: "Fully free roaming is simply not practical. We are trying to come as close to home price rule as possible." In home price rule, call charges while roaming are the same as those in a user's home circle.

Explaining his stand, Khullar said: "The transition to a fully free national roaming regime would mean that telecom service providers would not be able to recover their costs from roamers. They would have to pass on these costs to all consumers (a majority of them non-roamers) through higher tariffs."

His estimated impact, however, is far lower than that of telcos. He says the implementation of fully free roaming would cost telcos Rs 2,000-2,500 crore a year. According to Trai, only 13 per cent of mobile subscribers roam from one circle to another.

On the other hand, Reliance Communications (RCom) said in a statement, in view of consumers' interest, roaming charges should have been completely done away with. "We do not agree with the views expressed by certain operators that free roaming would adversely impact revenues. Instead, the growth of business would be rewarding for service providers, as has been seen and confirmed from the international experience," it said.

Telecom experts seemed to agree with this view. They said if roaming had been made fully free, consumers would have talked more and the additional revenue thereof would have easily neutralised the adverse impact on telcos' loss. Khullar, however, said, based on Trai's calculation, this premise was not true and the regulator had no alternative except a middle path.

"With an increased subscriber base and usage, the costs associated with national roaming have declined, but not vanished. There are still real costs incurred on providing the national roaming facility," Trai said in a statement. Besides, fully free roaming might also initiate mass migration of SIMs, it added.

According to the statement, Trai had prescribed a ceiling on national roaming rates in 2007 - of Rs 1.40 a minute for outgoing local calls and Rs 2.40 a minute for outgoing STD calls. However, operators were charging much less -an average Rs 1 a minute for outgoing local calls and Rs 2-2.25 a minute for STD. For incoming calls, the roaming charges currently are Rs 1.50-1.75 a minute.

Since there is little or no gap between Trai's new caps and the existing charges, it is unlikely that the roaming telecom rates would come further down.

The ceilings on outgoing local and STD have now been lowered to Rs 1 and Rs 1.50 a minute, respectively. Ceiling for incoming calls on roaming has been reduced from Rs 1.75 a minute to 75 paise a minute, according to the statement.

Telecom operators, however, do not seem to be very happy. COAI Director-General Rajan Mathew said: "There's no room for us now to increase roaming tariffs. SMS revenues, too, could be impacted, as those were under forbearance earlier and we had recommended that those should continue to be so. But the good thing is that Trai has left it to telcos to fix the upfront fee."

Goldman Sachs said in a report, with Trai moving away from its forbearance policy and deciding on a ceiling for local and STD calls, SMS might face a negative impact. Telcos earnings were likely to be hit as the revenues from lower incoming rates might not be fully offset by 'one-time fee'. "As the current tariffs for most packages in the market are largely in line with the new proposed ceilings, we do not expect most telcos to reduce tariffs to meet the new guidelines," it added.

In March, Telecom Minister Kapil Sibal had said the government would try to start national free roaming by October this year. The nationwide free roaming was announced as part of the National Telecom Policy 2012, approved in May 2012. As part of the 'One Nation' free roaming plan, it was proposed that consumers would not have to pay hefty roaming changes while travelling out of their home telecom circles.


TELECOM STOCKS UP
Reacting to the Trai decision, stocks of Bharti Airtel, Idea Cellular and RCom rose on BSE
  • Bharti Airtel
    Today's close: Rs 296.39
    Rise: 2.5%
  • Idea Cellular
    Today's close: Rs 139.69
    Rise: 2.7%
  • RCom
    Today's close: Rs 111.30
    Rise: 3.9%
Note: Rise over previous close; Source: BSE


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