Commuters use their mobile phones as they wait at a bus stop with an advertisement of Reliance Industries' Jio telecoms unit, in Mumbai, India July 10, 2017. REUTERS/Shailesh Andrade
© Reuters

India’s Reliance Jio has won a regulatory boost with the abolition of interconnection charges levied by mobile networks handling incoming calls — a move fiercely resisted by rivals such as Vodafone, which said it would unfairly benefit the new operator at their expense.

Jio, owned by oil products group Reliance Industries, had called for an end to the current system, under which the caller’s network provider makes a payment to the operator that receives each call. It said this was ill-suited to the emerging age of networks that process voice calls at negligible cost using internet-based systems — a technology that has been spearheaded in India by Jio.

In its regulatory announcement on Tuesday night, the Telecom Regulatory Authority of India endorsed this logic, noting that the interconnection charge was designed to compensate operators for costs incurred using older, less-efficient voice networks. Eliminating the charge, it said, would encourage operators to follow Jio’s lead by moving to internet protocol-based networks to save on cost.

“It is essential for the Authority to promote technologies with lesser costs so that consumers can benefit from lower tariffs,” it said. “The Authority is of the view that termination charges work as disincentive to deployment of new technologies such as VoLTE [an internet protocol-based voice technology] and migration to IP networks by operators.”

The mobile termination charge, currently set at Rs0.14 per minute, will be reduced to Rs0.06 from October 1 and eliminated entirely from January 1 2020, the regulator said.

The move was decried by Jio’s rivals, who have seen their margins squeezed by the new entrant’s arrival last September, forcing them to slash tariffs to compete with its aggressive pricing.

Analysts at India Ratings & Research said that Jio, in addition to the cost advantage gained from its VoLTE network, would benefit from the end of termination charges because it has a higher proportion of urban users, who account for a larger share of outgoing calls than rural ones.

Vodafone called the move “yet another retrograde regulatory measure that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole”. 

In a letter to India’s telecoms minister last month, Vodafone chief executive Vittorio Colao urged authorities not to tailor regulation to the ambitions of Reliance, which long has been seen as holding strong political influence. 

Bharti Airtel, India’s largest telecoms operator by sales, said the regulatory change, “which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favour”.

Reliance Jio did not immediately respond to a request for comment. The company previously has argued that the incumbent operators have benefited for years from excessive termination charges and that their abolition would speed the industry’s development.

Get alerts on Indian business & finance when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article