Ringing in a rupee-a-minute regime

The share prices of BSNL and MTNL rose by about three per cent the instant Telecom Minister Dayanidhi Maran announced his pet ‘One Indi...

The share prices of BSNL and MTNL rose by about three per cent the instant Telecom Minister Dayanidhi Maran announced his pet ‘One India’ plan, under which BSNL and MTNL lowered their STD tariffs to Rs 1 per minute for a call from anywhere to anywhere in India.

This was even though Maran had been pushing this plan for several months over the strong opposition of senior BSNL officials, who had claimed that BSNL would suffer a revenue loss of Rs 5,000 crore. But Maran claims that traffic will increase by 30 per cent due to the lower tariffs, and that the Average Revenue Per User (ARPU) would be Rs 450 to 500 for BSNL subscribers.

The lowering of STD tariffs by BSNL and MTNL is a bonanza for Indian telecom consumers since their private sector rivals would be forced to match this. Unlike the Reliance move of January 2006 lowering STD tariffs, there are no devils in the fine print this time.

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The existing customers of BSNL and MTNL are not put to any disadvantage by the increase in monthly rentals to Rs 299, since they have the option to continue with their existing plans — the One India plan is an additional optional plan and all existing tariff schemes of BSNL and MTNL would continue unchanged.

The operating margins of private service providers would come under pressure since they would now have to match the tariffs of BSNL and MTNL. Their share prices fell by 2 to 3 per cent almost the instant Maran made his announcement.

STD and international callers will also benefit due to the entry of MTNL into the National Long Distance (NLD) and International Long Distance (ILD) sectors. Other operators will also have to lower their NLD and ILD tariffs to match MTNL’s low NLD and ILD tariffs.

Maran has also forced TRAI’s hand on Access Deficit Charges (ADC). It was confusion over ADC charges by TRAI which had delayed the implementation of One India for several months.

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As per the existing Interconnect Usage Charge (IUC) regime, the operator has to shell out 30 paise each for origination, termination and ADC, and up to Rs 1.10 towards carriage charge (depending upon the distance). Going by this, STD call rates cannot be brought down below Rs 1.85 for a distance between 200-500 km, and Rs 2 a minute for call beyond 500 km.

According to my sources, TRAI is likely to make the ADC for STD calls a revenue share of 4-6 per cent. My sources state that for incoming ISD calls, TRAI may reduce the ADC to Rs 1.25 a minute from Rs 2.50 a minute. For outgoing ISD calls, TRAI may reduce the ADC to Rs 2.5 a minute from Rs 3.25 a minute.

According to sources close to Maran, the ADC amount paid to BSNL for carrying out its rural telephony obligations will be maintained almost unchanged at Rs 5,000 crore a year.

The writer, an alumnus of Carnegie Mellon and IIT-Kanpur, is a telecom consultant

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