Incumbent, New Telecom Operators Slug It Out On Pricing Models

Mumbai, India (PressExposure) July 07, 2011 -- The spat between incumbent and new telecom operators continues with both camps pointing out loopholes in the other''s pricing models on the issue of termination charge that may affect mobile tariffs. Bhartiairtel, in its comments has said, Uninor''s pricing model for termination charge is not comparable with the operating model of any operator with pan-India presence as the volumes used are too low for comparison."They (Uninor) have ignored costs like amortisation of entry fee, cost of 3G network, New Generation Network, billing etc," it added.

Termination charges, a part of Interconnection Usage Charges (IUC), are a levy paid by one operator to another on whose network a call ends. Any change in it has an impact on mobile tariffs.

On RCom''s suggestion of termination charge of six paise, Bhartiairtel said the cost of six paise is much below the actual cost per minute being incurred by RCom as suggested by its results.Bharti said according to RCom''s Q2 and Q3 2010-11 results, operating cost per minute is 31 paise per minute.Other costs like depreciation and WACC recovery also needs to be added which take the operating cost per minute higher, it added.Vodafone has said the mobile termination charge (average for three years) should be 35 paise, but "in worst case scenario can be brought down to 30 paise" compared to 20 paise at present.

While old operators have suggested revising the interconnection usage charge (IUC) upward, newer operators are of the view that the charge should be lowered to help further growth of the industry.

Anil Ambani-led Reliance Communications said the model submitted by incumbent operators is aimed at increasing termination charges and transfer more costs to competitors.

"The Authority must be cautious of their approach as that will curtail growth of the telecom sector," it said.It also alleged that incumbent operators "desired higher MTC (mobile termination charges) in the name of reaching rural areas or serving low income section of the society.""It is ironical the these operators had opposed Access Deficit Charge (part of the termination charges) for rural coverage and serving lower income groups but now want higher termination for the same purpose," RCom said. Another new player Uninor said its approach, based on marginal cost, will provide sufficient compensation to operators for providing interconnection services.

At the same time, the approach will ensure that competitive distortion in off-net/on-net pricing is minimised, it said. (MORE) SR

About RCom

Reliance - ADA Group's flagship company, Reliance Communications, is India's largest private sector information and communications company, with over 100 million subscribers. It has established a pan-India, high-capacity, integrated (wireless and wireline), convergent (voice, data and video) digital network, to offer services spanning the entire infocomm value chain.

Other major group companies - Reliance Capital and Reliance Infrastructure - are widely acknowledged as the market leaders in their respective areas of operation.

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Press Release Submitted On: July 07, 2011 at 5:02 am
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