Exempt telcos with under 15% market share from floor price norms: BSNL, MTNL to TRAI
State-owned BSNL and MTNL have told the sector regulator Trai that tariff fixation should be applicable only on telcos with more than 15 per cent subscriber base in a service area, while those with lower or negligible user base should be exempt from the purview of minimum floor price. It is pertinent to mention here that Bharat Sanchar Nigam Ltd (BSNL) – which operates telecom services across India except Delhi and Mumbai circles – has about 10.3 per cent market share in all India mobile subscriber base. Mahanagar Telephone Nigam Ltd (MTNL), present in Delhi and Mumbai, has 0.29 per cent mobile market share, as per the latest Trai data.
Reliance Jio leads the India mobile subscriber market with a share of 32.1 per cent, while Bharti Airtel and Vodafone Idea have 28.43 per cent share and 28.89 per cent share on an all India basis, respectively.
In their suggestions to Trai, the two public sector operators have acknowledged that the telecom industry is facing heat due to sudden and unexpected entry of "capital rich telecom service providers" offering free and ultra low tariffs, leading to closure of many players and that the situation has got compounded by companies required to make huge Adjusted Gross Revenue (AGR) payouts after the Supreme Court order.
"…the telecom industry needs a helping hand – at least in the immediate short term – from the authority to survive ," the two companies have told Trai in nearly identical submissions. The two have batted for fixing of floor prices by Telecom Regulatory Authority of India (Trai) but with a rider.
"…the fixing of floor price should be limited and applicable to Telecom Service Providers (TSPs) having a minimum subscriber base of 15 per cent in that LSA (Licensed Service Area) otherwise floor price may wipe out the prospective new TSP/TSP having small customer base from the telecom business altogether," BSNL and MTNL have said.
They added that to mitigate the present stress and to ensure adoption of future technologies, BSNL and MTNL both support the regulatory intervention for tariff fixation of the Trai with condition that operator with 15 per cent or less market share in that LSA be exempt.
The operators require a minimum customer base to remain viable and survive, BSNL and MTNL have reasoned in their comments submitted on Trai consultation paper on "tariff issues of telecom services''.
"Considering the financial health of the telecom industry and demands of major telecom service providers, BSNL feels that there is a need for a change in Trai policy of forebearence in tariffs as a short term major," BSNL said.
The state owned telecom companies have also said that although the operators have hiked their tariff recently, they remain susceptible from each other to maintain their customer base.
Even with the increase in tariffs the Average Revenue Per User (ARPU) levels are below the levels needed for long term survival, they felt. The two have favoured fixation of floor price based on average industry costs, and added that a markup of minimum 25 per cent or as approved by Trai above the current industry cost.
BSNL and MTNL in their separate submissions have said irrespective of the parameters used to fix the floor prices, Trai should ensure that the exercise does not result in windfall profits for a few operators.
They have said that floor prices should be fixed for mobile data services – applied uniformly to different category of subscribers. The public sector operators have also said that floor price should also be put for voice calls and SMS – a position different from private telecom operators.
"In the present competitive situation, the tariff for voice calls have been worst causality and therefore it cannot be left without the intervention of the authority. In fact, the need to fix floor price for voice calls is as strong as for mobile data," BSNL and MTNL have said.