Government Should Scrap Interconnection Charges, Says Reliance Communications
Reliance Communications argues that consumers are shifting towards web-based apps
The government should review and scrap interconnection charges, said Gurdeep Singh, chief executive officer of the consumer business at Reliance Communications Ltd.
As the industry is transitioning from per minute or per megabyte (MB) pricing plans to average revenue per user (ARPU) led tariff plans, government should review and scrap the staggering per minute interconnect usage charge of 14 paise”, Singh told BloombergQuint.
A telecom company levies an interconnection usage charge for incoming calls. These charges are payable by a telecom operator whose subscriber makes a call, to another service provider whose subscriber receives the call. The operators with large subscriber base usually tend to make money from this charge, while smaller operators end up paying on a net basis.
Reliance Communications reported weak third quarter numbers, with revenue falling 8 percent year-on-year (YoY) to Rs 4,820 crore, and posting a net loss of Rs 531 crore, as against a net profit of Rs 303 crore in the year-ago period.
Intense competition and demonetisation weighed on the top-line and bottom-line in the December ended quarter. Singh said this is also the first time that all operators have registered a quarter-on-quarter decline.
This has been a difficult quarter, with all operators registering decline (QoQ) in the top-line and bottom line for the first time on account of intense competition and demonetisation.Gurdeep Singh, CEO-Consumer Business, Reliance Communications.
Compared to second quarter, which is known to be a seasonally weak quarter, the top three telecom operators—Bharti Airtel Ltd., Idea Cellular Ltd. and Vodafone India Ltd.—saw their revenue and profit decline.
Though Reliance Communications lost 31 lakh data users to competitors in the third quarter, Singh expects data to contribute more towards the growth of the company.
The company expects its Rs 149/month plan to attract customers using older second generation (2G) handsets, as it offers unlimited calling and 300 MB of 2G data. The company has also launched three different data usage plans that for data-centric users.
On ratings agency Moody’s recent downgrade, Singh said that the deleveraging plans of the company are on track, and the approvals from Competition Commission of India and exchanges for the merger with Aircel Ltd. are under process.
Moody’s has downgraded Reliance Communications’ dollar denominated debt by a notch with a negative outlook on account of the company’s high debt. The negative outlook was mainly because of uncertainty around the timing and completion of its announced restructuring plans.
The tower deal with Brookefield and the merger with Aircel, would bring down Reliance Communications’ gross debt close to Rs 13,000 crore from its current level of Rs 44,000 crore. Going forward, the management said that there are parallel deleveraging plans where the company will look to monetise its real estate assets to reduce its remaining Rs 14,000-crore debt.
In 2015, Reliance Communications had sold nearly 150 residential apartments for Rs 330 crore to pare some of its debt.
Share prices of Reliance Communications slipped 3.3 percent on Monday to close at Rs 33.45 apiece, post its earnings announcement. The company is also one of the worst performers on the BSE Telecom Index. Its stock price has fallen 34 percent over the last 12 months, while the telecom index gained 3.3 percent in the same period. Of the total 18 analysts tracked by Bloomberg, only one has a ‘buy’ rating on the stock.