India minister wants cut in mobile termination rates

Ruth David
04 Nov 2009
00:00
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Daily News

Mobile operators should cut termination charges they pay each other for calls across networks and pass on the benefits to consumers, Indian Telecommunications Minister Andimuthu Raja said on Tuesday after meeting industry representatives in New Delhi.

“Termination charges can be reduced by 2010, accordingly tariffs can be reduced,” Raja said. His directive isn’t binding since telecom charges are set by the independent regulator Telecom Regulatory Authority of India.

In March, the regulator had reduced call termination charges for domestic calls on mobile or fixed lines by a third, to Rs0.2 ($0.004) per minute.

Call rates in the country are already among the lowest in the world, at 1 US cent a minute. In recent weeks virtually every operator has effectively cut prices further by introducing per-second billing.

Reliance Communications last week reported a 52% drop in second quarter net income, sending shares tumbling. Reliance, the second biggest carrier by customer numbers, yesterday started charging calls on a per-second basis, and its stock continued its losing streak, closing down 5.7% on the Bombay Stock Exchange.

Last week market leader Bharti Airtel reported profit growth had slowed for the ninth quarter, and introduced per-second billing.

In a note on Bharti’s initiative Monday, HSBC analysts said: “While we agree with the strategy, the move is revenue destructive for the company as such we have cut our FY11 EPS estimate by 34%.” With Bharti’s move, “we expect the overall sector to shift to the per-second billing format,” it said.

In a rapidly growing market where operators are struggling to remain profitable, “we would view any cut in termination charges by the regulator as downside risk,” HSBC said in its note.

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