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Idea CEO says IUC cut will ensure only one technology will survive

LiveMint logoLiveMint 27-09-2017 Amrit Raj

New Delhi: A week after India’s telecom sector regulator decided to slash interconnect usage charge (IUC) to 6 paise a minute, Idea Cellular Ltd on Wednesday said that the decision will eliminate all telecom technologies other than 4G.

“While it is important to talk about the vision 2020, it is also important to talk about the big elephant in the room that nobody is talking about,” Himanshu Kapania, chief executive and managing director of Idea Cellular Ltd, said at the India Mobile Congress.

“The challenge today is that the government of India has to decide whether it only wants forward-looking technologies or will it allow co-existence of 2G. Trai (Telecom Regulatory Authority of India) has pushed us to a level where only one technology survives and wants all other technologies such as 2G, 3G to close down,” he added.

On 20 September, Trai more than halved the so-called interconnect usage charge (IUC) to six paise with effect from 1 October and abolished it all together for local calls starting 1 January 2020, dealing a big blow to older telecom firms, such as Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular, and a potential boost to newcomer Reliance Jio Infocomm Ltd.

“Undoubtedly, this will impact the long-term competition structure in the industry,” Kapania said.

Trai believes that the reduction of IUC, levied by a telecom operator for terminating a call from another telecom network will benefit consumers and boost competition.

Jio, of course, has a different view on the matter.

“We have used 4G as a vehicle and I am glad to hear every operator today talk about 4G. What a change in the last couple of months. If you think about it, there were perceptions that 4G and VoLTE are the 2020 phenomenon at the earliest ...,” Mathew Oommen, president network, global strategy and service development, Reliance Jio. “We have gone from 155th rank in broadband index to the first in the mobile data usage in the world and we are happy about it,” Oommen added.

Gopal Vittal, chief executive of Bharti Airtel in India and South Asia, and Sunil Sood, CEO of Vodafone India, did not comment on the issue. According to Kapania of Idea, the recent development has drastically altered the dynamics of the industry “resulting into the sector passing through severe financial as well as mental stress”.

That coupled with introduction and subsequent proliferation of bundled usage plans, outcome of a lack of regulatory intervention has had a deep impact on the industry, he said.

“No industry can survive if mobile voice tariffs have fallen by half in a year. Data tariffs have fallen between 1/10th to 1/15th in just in the span of one year. They have come to the levels, which are below cost.

The announced IUC charges will further deplete the industry besides creating inter-operator imbalance on account of high traffic asymmetry. The fault lines are already visible with industry able to register a degrowth first time in the history,” he added, seeking an urgent interventional support from the government in the form of a “reasonable package” that can help in alleviating the current financial stress in the sector.

Idea Cellular, India’s No. 3 telecom firm, reported a third straight quarterly loss in June quarter. It reported a loss of Rs815 crore for the three months to 30 June, compared with a profit of Rs220 crore a year earlier.

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