International termination rate cut by Trai to hurt Airtel, Vodafone and Idea

NEW DELHI: The telecom regulator may reduce the international termination rate (ITR) -- a charge paid by international operators to local networks that receive calls --by almost half from the current rate of 53 paise a minute, a move that would deal a body blow to India's top telcos Bharti Airtel, Vodafone India and Idea Cellular which receive bulk of the international calls on their network.

"ITR could be around 25-30 paise a minute," said a person aware of the developments. "It could be announced very soon," the person added, asking not to be named.

He said that the imminent reduction may be attributed to the rising use and popularity of calls on data-based apps such as Whatsapp and FaceTime that offer high quality voice and video calls at a fraction of the tariff charged by carriers for international mobile calls.

The reduction by nearly half would erode a good chunk of the Rs 5,000 crore of revenue from incoming international calls, most of which terminate on networks of Bharti Airtel, Vodafone and Idea. Change in ITR will make things worse for incumbents that are already reeling under the impact of a 57% reduction in local interconnect charges from last October 1.

New entrant Reliance Jio has been seeking a reduction to 6 paise a minute in the international charge to bring it at par with the local IUC -- which is paid by operators from where calls originate to the network of those on whose network the call terminates -- after the regulator slashed it by 57% from 14 paise a minute.

But a Telecom Regulatory Authority of India (Trai) official had told ET earlier that ITR, unlike IUC -- which is a transaction between two domestic companies -- is not a bilateral issue but a multilateral one involving an Indian operator, telcos based in several countries, and other players in between also, such as international long-distance operators and national long-distance operators.

A call from a foreign operator is typically routed via long-distance operators to a local telco, therefore the argument to reduce ITR directly to the local levels of 6 paise would not hold water, the official had said.

Incumbent carriers though have, consistently, wanted the international rate to be increased -- to Re 1initially and to Rs 3.50 later on the grounds that existing rates are very low for India when compared to global markets, which in turn hurt call volumes going out of India, and thus revenue.

The Cellular Association of Operators in India (COAI) had earlier submitted to Trai that about 4.5 billion calls originate from India to overseas markets, while 88 billion calls land in India from other countries. Countries such as the US, UK and Germany charge 67 paise, Rs 13.36 and Rs 10.69, respectively, as termination charge per minute for international incoming calls, far higher than India's 53 paise a minute.

A senior executive at one of the top three had termed any move to reduce the ITR as "anti-national", saying it would benefit overseas players which would need to pay substantially lower termination charges at the cost of local telcos.

International rates are settled on a country-by-country basis, based on multiple factors including Indian tariff regulations, foreign government tariff regulations and bilateral commercial negotiations between carriers and aggregators as well as foreign currency fluctuations.