Jio-Stationary Orbits

For the last three years at least, a running bet among corporate honchos centred around predicting Reliance Jio’s lau­nch. Now, as Mukesh Ambani’s telecom dream looks like a reality, the telecom industry is not taking it lightly. A pitched battle is being fought between existing telcos—Airtel, Vodafone and Idea Cellular—and Ambani’s second telecom play, Reliance Jio. As an indication of the stakes at play, this uns­eemly fight has even seen the existing cabal dial the Prime Minister’s Office (PMO) for help.

The band of players has accused Jio of camouflaging its test run for commercial services. The Cellular Operators Association of India (COAI), which is controlled by them, has also trained its guns at regulator Telecom Regulatory Aut­h­ority of India (TRAI), accusing it of favouring new entrants (read Jio) in its policy proposals and has shot off letters to the DoT and TRAI. In an uncharacteristic reply, Rel­iance Jio has in turn accused the incumbents of targeting it in a vilification campaign and not providing it with adequate interconnect, hampering its launch.

In private, existing players fear Reliance Jio will attract a large mass of consumers, thanks to extremely low, predatory pricing. The fear is not unfounded—in the early days of Indian mobile telephony, Mukesh Ambani’s Reliance Infocomm had attracted a large number of users with its dirt-cheap call rates. “It is a concern for other operators, as Jio will come with pan-India coverage and latest technology and promises superior speed and quality and can attract the high ARPU customers from other networks. The small and marginal players will not be able to sustain and fold up. With Reliance Infocomm, there was a voice boom, with Jio it will be data,” warns Romal Shetty, partner and head of telecom at KPMG.

The problem is that other existing telecom firms just don’t have cash to burn. Most players have very high debt and cash requirements, more so with India’s biggest spectrum auction coming up next month, which is likely to drain them further. If they start losing customers to Jio now, it will push them tow­ards a fight for survival. What has raised hackles is TRAI releasing a consultation paper on Interconnection Usage Charge (IUC) in early August. This proposes making IUC free.

IUC is a charge a telecom company pays another operator for terminating calls on the latter’s network. TRAI’s consultation paper proposes to either make IUC free or introduce a ‘Bill and Keep’ regime, an arrangement where two operators terminate calls at each other’s network for free. This will badly hurt the operators. According to rough estimates, IUC acc­ounts for between Rs 6,000 crore and Rs 9,000 crore per operator. Says Shetty, “With zero IUC, incumbents who have invested in network will suffer because for a new entrant there are more calls in older networks than a new one.”

The timing of TRAI’s consultation paper is interesting—IUC was last rev­ised in March 2015, when it was brought down from 20 paise to 14 paise. TRAI had said that it will be reviewed in 2017-18. Thus, the consultation process should have begun next year. Unsurprisingly, questions are being asked about TRAI’s intentions and whether this will benefit Reliance Jio, which is planning a commercial launch by December this year.

“We have not decided anything yet. It is just a consultation process. So, to make allegations of bias at this stage is wrong. Consultation processes take six-seven months and any decision will come next year,” TRAI chairman R.S. Sharma told Outlook. Justifying the timing, Sharma says that in a fast-changing technological landscape where internet telephony is becoming prominent and the unit of measurement is changing to bits and bytes, it is essential to take a fresh look at the IUC. Additionally, consumers will gain. “Ultimately, if the costs come down, it will be better for consumers as telcos will not have to pay,” he says.

Obviously, the aggrieved firms disagree and feel that TRAI’s actions are designed to help Jio in particular. Says COAI dir­ector-general Rajan Mathews, “There is a pre-defined agenda in the interconnect paper which will benefit new entrants. Also, in the last few weeks there has been a flurry of consultation papers on discriminatory pricing, free data, quality of service and interconnect that are skewed against incumbents.”

The incumbents and COAI have also attacked Reliance Jio on its pilot run. A top official from an incumbent operator says, “They are calling it a test run but have 1.5 million customers. A pilot run should test one’s own network, but this is nothing short of a full commercial run which is why they are seeking interconnect with other players.” Thanks to the COAI letter, the telecom ministry has now asked TRAI to look into Reliance Jio’s test run and has sought details of the 1.5 million users.

In an uncharacteristic manner, Rel­iance Jio has shot back with a letter to DoT secretary J.S. Deepak, stating: “The said letter from COAI, prima facie, appears to be an exercise with the ulterior motive of promoting the vested interests of the incumbent dominant operators. Further, COAI has del­iberately indulged in an unwarranted vilification campaign, not only against RJIL, but also against TRAI...without any basis whatsoever.” It also said that tests being conducted by Jio were well within the scope of the terms and conditions of the unified license. In fact, Jio has complained to the government that existing players were not giving it sufficient interconnect, because of which its 1.5 million test users were experiencing 65 per cent call failures, thus hampering Jio’s plans of launching commercial services. It has asked TRAI to take legal action.

As expected, incumbents are resorting to various tactics to take Jio head on and fight it on pricing. Last week, Airtel introduced a plan where, for Rs 1,199, it offers unlimited local and STD calls, 100 SMSes a day and 1 GB data. Others are also contemplating similar moves. With a few months to go before Reliance Jio’s likely launch, this tussle over turf is expected to intensify, as operators scramble to maintain their share of the pie. With firms bending over backwards to give a better deal and retain subscribers, consumers will emerge as the biggest winners.

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The Attack

• COAI, which represents Airtel, Vodafone and Idea, has accused regulator TRAI of favouring new entrants

• They have accused Reliance Jio of running full commercial services in the name of a trial run

• Existing players concerned that Jio will disrupt services and break their control over the sector

The Regulator

• TRAI consultation proposes to make Interconnect Usage Charge free. This will adversely affect incumbents.

• Operators have complained about TRAI, government has sought details of Jio’s trial run

The Defence

• Jio has accused incumbent operators of not giving proper interconnect, which is hampering its commercial launch. It is running a trial run on 1.5 million customers.

• It has accused COAI of mounting a vilification campaign against it