TRAI net phone call hits Bharti, Vodafone, helps Mukesh Ambani

The Telecom Regulatory Authority of India’s (TRAI) suggestion to open up internet telephony could well be a game changer, severely affecting existing players like Bharti and Vodafone while benefiting new entrants like Mukesh Ambani.

It will also bring about severe pressure on international and local call tariffs.

The regulator has proposed to allow internet telephony without restriction to all unified licensees.

Should the proposal be accepted by the Department of Telecommunications, or DoT, internet service providers (ISPs) can terminate calls on fixed line or cellular networks — something they are not allowed to do currently.

Sachin Salgaonkar, Piyush Mubayi and Paras Mehta, analysts with Goldman Sachs, said this would beneficial for new 4G entrants like Reliance Industries and others even as it would adversely impact legacy players like Bharti, Vodafone, Idea and others.

“This would likely increase competition to cellular operators from ISPs. We consider this (allowing internet telephony to all Unified licencees) negative for all cellular operators,” they said in a note on Monday.

Kunal Bajaj, Indian partner with telecom consulting firm Analysys Mason, said local calling rates today were already very cheap and Trai’s recommendation on Internet telephony would now lead to cheaper international calls, as ISP’s will now offer cheaper incoming and outgoing calls.

“Today, there is a facility of IP-to-overseas, but with this, the subscriber can call from a landline and thus avoid the international rate. However, this competition will be good for the industry as incumbents are in a position to offer much lower international rates,” he said.

Another recommendation that is likely to hit legacy players negatively is the one relating to Infrastructure Provider-1 (IP-1) category, which includes towers, be brought under the Unified Licensing regime.

This, analysts said, would lead to tower companies like Indus, Bharti Infratel and even Idea’s 9,192 towers paying a licence fee of 8%.

Trai has noted that the government would have earned revenues of Rs1900 crore from IP-1 companies next fiscal based on an 8% licence fee.

This would lead to margin erosion for telcos, analysts aver.
Bajaj believes the 8% licence fee on towers can be offset by telcos and will not impact the end customers.

“Rather, it will help them to avoid double taxation” he said.
Mahesh Uppal, director, Com First (India), a firm dealing in regulatory affairs, said the fee on towers is retrograde.

“Its net impact will be to raise costs, which will impact operators and result in some tariff revision as well. The government would benefit by about Rs2,000 crore.”