Com­mis­sion to Pull Up Trai for Let­ting Jio Of­fers Run too Long Crit­i­cises the reg­u­la­tor for ‘jeop­ar­dis­ing’ the health of the sec­tor, say­ing Jio’s pro­mo­tional of­fers cost the govt 685 crore

The Economic Times - - Com­pa­nies: Pur­suit Of Profit - Anan­dita.Manko­tia@ times­

New Delhi: Re­liance Jio In­fo­comm’s free voice and data ser­vices have cost the gov­ern­ment ₹ 685 crore, prompt­ing the Tele­com Com­mis­sion to con­sider pulling up the reg­u­la­tor for “jeop­ar­dis­ing” the health of the sec­tor by al­low­ing the of­fers to con­tinue be­yond the stip­u­lated time.

This is the first time that the high­est de­ci­sion-mak­ing body in the Depart­ment of Telecom­mu­ni­ca­tions (DoT) has com­mented on the du­ra­tion of Jio’s back-to-back pro­mo­tional of­fers and their im­pact on the gov­ern­ment’s fi­nances in the third quar­ter of this fi­nan­cial year.

Jio’s has of­fered free voice and data ser­vices ever since it started op­er­at­ing on Septem­ber 5, forc­ing ri­vals Bharti Air­tel, Voda­fone In­dia and Idea Cel­lu­lar to slash their rates in a bid to re­tain cus­tomers, lead­ing to a drop in their rev­enue. The gov­ern­ment col­lects li­cence fees and spec­trum us­age charges from mo­bile phone op­er­a­tors, which are cal­cu­lated on the ba­sis of their rev­enue. “It is ex­pected the rev­enues will fur­ther de­cline by 8-10%, as per mar­ket ex­pec­ta­tions,” the com­mis­sion noted, ac­cord­ing to a doc­u­ment re­viewed by ET. A strong com­mu­nique will be framed against the Tele­com Reg­u­la­tory Author­ity of In­dia (TRAI), which will come on the heels of the com­mis­sion ques­tion­ing the reg­u­la­tor’s ra­tio­nale for rec­om­mend­ing penal­ties of ₹ 3,050 crore each on op­er­a­tors for al­legedly deny­ing Jio ad­e­quate points of in­ter­con­nec­tion, which en­able calls to be made from one net­work to another. Jio’s free of­fers, the com­mis­sion noted on Wed­nes­day, have led to down­ward pres­sure on tar­iffs, fur­ther lead­ing to “lower gov­ern­ment rev­enues”.

“The com­mis­sion has ex­pressed its deep con­cerns for the health of the sec­tor and asked the Tele­com Reg­u­la­tory Author­ity of In­dia to im­ple­ment its de­ci­sion of June 2002 and Septem­ber 2008 re­gard­ing pro­mo­tional tar­iffs,” a se­nior of­fi­cial with knowl­edge of the com­mis­sion’s de­ci­sion told ET.

The Trai’s June 2002 de­ci­sion re­stricts the va­lid­ity of pro­mo­tional of­fers by tele­com op­er­a­tors to 90 days. The Septem­ber 2008 or­der spec­i­fies that tel­cos must dis­close de­tails of pro­mo­tional of­fers, which in any case shouldn’t ex­ceed 90 days.

Bharti Air­tel had also chal­lenged the le­gal­ity of Jio’s free calls. It had filed a pe­ti­tion with the Tele­com Dis­putes Set­tle­ment Ap­pel­late Tri­bunal con­tend­ing that the in­ter- con­nec­tion us­age charge of 14 paise per minute was a floor price be­low which op­er­a­tors couldn’t pro­vide voice calls. The charge is paid to net­works that re­ceive calls.

The com­mis­sion high­lighted that by of­fer­ing free ser­vices till De­cem­ber 31, Jio had ef­fec­tively vi­o­lated the 90-day cap on pro­mo­tional of­fers. “Re­liance Jio com­menced its ser­vices from Septem­ber 5, 2016, and of­fered a pro­mo­tional tar­iff up to 31De­cem­ber 2016, which was be­yond a pe­riod of 90 days,” it said.

Ac­cord­ing to the note, lower rev­enue will af­fect tel­cos, which owe over .₹ 1 lakh crore to the gov­ern­ment as de­ferred pay­ment for spec­trum and close to ₹ 4 lakh crore to banks.

“If the fall­ing trend con­tin­ues, it will im- pact the pay­ment and the in­vest­ment ca­pac­ity of the in­dus­try. In those cir­cum­stances, the pos­si­bil­ity of de­fault­ing on re­pay­ment of loan and in­stal­ment of de­ferred pay­ment for ac­qui­si­tion of spec­trum in ear­lier auc­tions can­not be ruled out,” the note says.

The com­mis­sion is an in­ter-min­is­te­rial com­mit­tee with sec­re­taries from the de­part­ments of in­dus­trial pol­icy & pro­mo­tion, IT and eco­nomic af­fairs as mem­bers and the sec­re­tary in the tele­com depart­ment, JS Deepak, as its chair­man.

Tele­com op­er­a­tors have cried foul over Jio’s pro­mo­tional ser­vices, terming the ‘Happy New Year’ of­fer as noth­ing more than an il­le­gal ex­ten­sion of the in­au­gu­ral ‘Wel­come’ of­fer.

Trai gave Jio’s pro­mo­tional of­fers a clean chit, say­ing there is noth­ing to stop a tele­com op­er­a­tor from launch­ing a sec­ond one af­ter the first ends. The reg­u­la­tor floated a con­sul­ta­tion pa­per last week aimed at clear­ing the con­fu­sion over grey ar­eas such as pro­mo­tional of­fers.

Op­er­a­tors have been fac­ing the heat of Jio’s free ser­vices. While Bharti Air­tel re­ported a fall of 55% in net profit in the quar­ter ended De­cem­ber, Idea Cel­lu­lar posted its first loss since list­ing on the stock ex­change. The com­mis­sion said the reg­u­la­tor must be re­minded that its in­abil­ity to im­ple­ment its own or­ders could jeop­ar­dise the bank­ing sec­tor, de­ferred spec­trum pay­ments to the gov­ern­ment and or­derly growth of the sec­tor.

Air­tel, Idea and Voda­fone’s In­dian unit have com­plained of the reg­u­la­tor’s un­fair treat­ment towards them vis-à-vis Re­liance Jio, which main­tains it hasn’t vi­o­lated any rules. It said the Happy New Year of­fer con­tin­ues to pro­vide free voice and data ser­vices, although there is a cap on daily data con­sump­tion.

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