TRAI's STD move to hit telcos

NEW DELHI: Telecom regulator TRAI’s move to ask the government to give customers the freedom to choose their long-distance carrier for STD and ISD services, coupled with the introduction of internet telephony, is set to impact the bottom lines of all service providers. ET spoke to several telecom analysts and market watchers who were of the view that if DoT were to give a go ahead for both sets of the regulator’s recommendations, it would result in a 33% to 77% fall in telcos’ revenues from long-distance services. About 10-20% of the service providers’ total revenues come from long-distance services.

ET first reported on Wednesday that TRAI would ask the government to give customers the freedom to choose their long-distance carrier (via calling cards) a move that will lead to cheaper tariffs—both STD and ISD. While telcos stand to lose, the consumer will be the biggest beneficiary. Telecom tariffs in India, which are already the lowest in the world, are set to fall further.

“In overall terms, the revenue loss for the telcos may not be much, but it will be significant as long-distance services offer moderately higher margins. These recommendations are the final mail in the coffin and truly rings in the death of distance. Since many service providers already have the long distance infrastructure in place, they may forced to offer flat charges. First, they may have to do away distance based tariff structure. At a later stage, they may even have to do away with duration based charges,” explains Mahesh Uppal, director, Com First (India) and a consultant on regulatory issues in telecom.

“Operators have no choice but lower their long distance tariffs. We are set to move to a system where there is large scale bundling where service providers will provide certain number of local and long distance minutes free. Telcos revenues will not fall from current levels, but their total sales will not increase at the same rates as in the past.

In the long term, India’s telecom stocks may lose some of its shine,” added an analyst with a leading brokerage firm. According to Rohit Prasad, who is a telecoms analyst and a professor at Management Development Institute (MDI), Gurgaon, telcos would try to hit back by using the interconnect regulation in the favor. Currently, all long distance calls involve carriage and termination costs. “In the case of both internet telephony and calling cards, interconnect agreement will be the key to their success,” he added.

As reported earlier by ET, TRAI on Wednesday asked the Department of Telecom to permit all national and international long distance carriers, which include several non-mobile operators such as Gail, Powergrid, RailTel, Sify, Tulip IT, AT&T, British Telecom, France Telecom, Cable and Wireless and Verizon amongst others to market their products directly to the consumer in the from of pre-paid package or through calling cards.

Source : Economic Times