With the telecom regulator slashing interconnection usage charges (IUC) to 6 paise per minute, telecom industry expert Sanjay Kapoor feels it will further dent the financial books of the incumbent players in the short run.
“IUC is a further dent in the short run for the incumbents and probably a good news for the challenger,” Kapoor told BTVi in an interview.
“Saying that Telecom Regulatory Authority of India‘s decision of slashing IUC and then phasing it out by January 1, 2020 is not a surprise as talks were on for long. For me the issue in the industry is far beyond the IUC price. The IUC gets accentuated because of the situation that prevails. The whole pricing regime in the country is not sustainable. We have a unique situation where price of the spectrum, which is the biggest raw material for this industry, is pegged at the highest price compared to rest of the world. And the realization that we do from our customers for the calling and data are the least in the world. Then we have data offering that we transform to data economy and the digital economy where we are giving tax which virtually have unlimited data, which is not even offered in the developed part of the world.”
Kapoor said the incumbent operators are losing their topline and falling.
“They have almost their complete profitability. They were large operators making money every quarter, now they are in the red. The total debt of the industry has reached such a level that even banks would be worried. And in the midst of these we have an IUC, which is again a contentious issue. The IUC is pinching more because of the overall financial health of the industry.” ALSO READ: IUC cut to benefit Reliance Jio, dent incumbents’ earnings: Analysts
Kapoor said what is more worrisome is that India is going to be left behind on optimising consumer experience on data compared to rest of the world. “Because where is the money going to come from to reinvest in improving customer experience and be globally competitive?” he asked. ALSO READ: TRAI has given its views, concerned players may explore remedies: Jaitley on IUC
He also added that the technology longevity is shrinking. What used to last for 10 years, now lasts for four or five years.