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Jio fallout: Telecom Commission to ask Trai to enforce rules on promotional offers

LiveMint logoLiveMint 22-02-2017 Amrit Raj

New Delhi: The Telecom Commission, the top decision-making body of the telecom department, will ask the regulator to ensure orderly growth of the sector, citing Reliance Jio Infocomm Ltd’s free promotional offers as one of the reasons for the deteriorating health of mobile phone service providers.

It plans to ask Telecom Regulatory Authority of India (Trai) to implement its decision on promotional tariffs issued in June 2002 and September 2008 in “letter and spirit”, two people familiar with the matter said, requesting anonymity.

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Trai’s 2002 order restricts the validity period of promotional offers to 90 days while the 2008 order stated that all service providers need to state the eligibility criteria for such offers and the duration in which the offers are valid.

When contacted, Trai chairman R.S. Sharma said, “I have not received any communication.”

An email sent to Reliance Jio remained unanswered till press time.

The Telecom Commission’s decision comes in the wake of free services offered by Reliance Jio that eroded the profitability of telecom operators during the quarter ended 31 December.

On Tuesday, Jio vowed to provide at least 20% more data to users on every tariff plan offered by rivals, renewing concerns that the bruising price war in the world’s second largest telecom market by users is unlikely to end soon.

Telecom Commission is also worried about declining licence fees, spectrum usage charges (SUC) and service tax collections from the industry.

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Licence fee collection has declined to Rs3,166 crore in the December quarter from Rs3,584 crore in the preceding three months.

SUC declined to Rs1,553 crore from Rs1,820 crore during the period.

The commission observed that any fall in industry revenue will impact industry’s investment and repayment capacity, which may result in defaults on loans and spectrum purchase charges owed by operators to the government.

The commission expects the industry’s revenue to decline by as much as 10% in the March quarter.

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A similar trend is likely to be seen in the case of SUC and service tax collections.

The downward pressure on tariffs has ushered in bundled voice and data plans, resulting in lower governmental revenues, one of the two people cited above said.

“The commission said that Trai has acknowledged that long promotional periods dilutes the promotional character,” the second person said, adding that such tariff plans cannot be considered as appropriate for promoting and ensuring orderly growth of telecom sector, which requires continuous reinvestment in the network.

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