Jio Phone to Hit Telecom Sector, Erode Revenues: Vodafone to DoT

The country's second largest telecom player Vodafone expects Jio's 'effective free phone' with unlimited calling to erode operators' revenues which are already under pressure and sought reduction in various levies imposed by the government as a breather to the industry.

"...the new operator continues to aggressively under-price its services, including announcing launch of 'Effective Zero Price Feature Phone' with unlimited voice.

"This is likely to cause further erosion in revenue for existing operators," the company in a letter to the Telecom Commission Member (Finance) Anuradha Mitra.

RIL Chairman and MD Mukesh Ambani recently launched JioPhone, a 4G feature phone at a one-time fully refundable deposit of Rs. 1,500 per unit. JioPhone beta testing starts from August 15. The booking will start from September 24 online as well as through Reliance Retail and Jio stores.

Vodafone said there is continuous decline in its revenue from telecom services and it has recorded further decline of 3.41 percent in the the quarter ended June 2017.

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It also called for reducing the interest rate applied for deferred spectrum payments.

"...a reduction in the interest rate applied for deferred spectrum payments is necessary to reduce burden on operators.

Hence, we have requested reduction from 10 percent to G Sec rate of 6.25 percent - 6.5 percent on deferred payment," the letter said.

Vodafone said that revenue share with the government imposes huge burden on telecom operators even though companies purchase spectrum at market price.

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The company requested the DoT to consider recommendation of the Telecom Regulatory Authority of India for reducing Universal Service Obligation Fund from 5 percent to 3 percent as private operators have already rolled out services in rural areas and current call termination rates are very low.

"...despite having rolled out in rural areas, we still have to pay USO and the mobile termination rates are also below cost which adversely impact us since majority of the calls in the rural areas are incoming," the letter said.

At present, a telecom operator charges 14 paise for every incoming call that it gets from network of other operators.

"Therefore, we earnestly request kind consideration and early decision on reduction in the USO levy from 5 percent to 3 percent and reduction of interest charges along with rescheduling the payment period, which has been tabled before DoT and IMG (inter-ministerial group)," Vodafone said.

As per official data, revenues of telecom operators from services dipped by about 15 percent to Rs. 40,831 crores in the January-March quarter this year compared to Rs. 48,379 crores in the same period of last year.

The government has formed an IMG which is expected to submit its recommendation very soon to address financial woes of the telecom sector.