Of a new operator, says Vittorio Colao
NEW DELHI: Vodafone Group Plc. chief executive Vittorio Colao has the urged the Indian government to ensure that the industry is not regulated to suit the ambition of a new entrant, referring to billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd.
“It is undesirable for a critical core industry like telecom to be regulated based on the ambition of a new operator with no history of financial sustenance,” Colao said in a letter written to telecom minister Manoj Sinha.
Colao warned that a move to further reduce the mobile termination charge (MTC) risks destroying the very companies that have invested to build the industry. Last week, Kumar Mangalam Birla, chairman of Idea Cellular Ltd, expressed similar apprehensions in a letter to the telecom regulator.
Reliance Jio has proposed scrapping of interconnection user charges (also known as MTC), while Bharti Airtel Ltd, Idea Cellular and Vodafone India Ltd sought to raise them.
Vodafone Group, Colao said, is alarmed by reports suggesting that the telecom regulator may reduce MTC. “The existing rate of 14 paisa is already below cost. Even at the present MTC rates, 15-20% of our sites run at a loss.”
Under the interconnection user charge, or IUC, for every mobile phone call, the telecom firm that originates the call pays 14 paise to the one that receives the call. On a net basis, established operators with more users and bigger networks tend to earn more from IUC, while newer and smaller ones find it a burden.
Reliance Jio has proposed zero IUC charges, while the other three presented their cost structures to press for a hike in IUC to at least 30 paise. Jio says its cost of servicing a call is next to zero and hence it proposed a so-called “bill and keep” model, in which companies only keep a record of incoming calls on their network but don’t raise any demand from other operators.
Colao rejected Jio’s claims. “There is a view being propagated by the new entrant that as a 4G-only operator, it has a cost advantage in the region of 70% compared to the established 2G/3G/4G operators. There is no evidence – either Indian or international -- to support such a claim. If this was indeed true, there would be a number of 4G-only operators emerging around the world, which is not the case,” Colao said.
An email sent to Jio remained unanswered till press time.