Free Offers By Telcos Can End For Ever; TRAI Will Draft Rules For ‘Predatory’ Pricing In The Next 45 Days

Right now, Indian telecom industry is reeling under debts of Rs 4.5 lakh crore, because revenues being generated is only Rs 2.11 lakh crore, per year. And, EBITDA or earnings before interest, taxes, depreciation and amortisation of the overall industry is only Rs 50,000 crore.

Airtel, Idea, Vodafone, Reliance, Aircel, Tata have already suffered Rs 12,500 crore loss, this fiscal year.

Except for Reliance Jio, almost every telecom operator has attributed this massive loss to the entry of Jio. And, Jio was able to disrupt the market by lowering down data prices and offering free voice calling for all.

Within business circles, this is known as predatory pricing, and it seems Telecom Regulatory Authority of India (TRAI) has decided enough is enough.

If we believe reports coming in, then the very concept of such predatory pricing can come to an end, forever; within next 45 days.

TRAI Will Announce Rules For Predatory Pricing

As per some officials, TRAI is right now forming regulations and rules, pertaining to free offers (aka predatory pricing), which has been done to introduce more transparency among telecom operators related to pricing.

Telecommunication Tariff Order (TTO) of 1999 is being reviewed and reworked to induce this change.

And TRAI has given themselves a deadline of 45 days for implementing this.

Trai secretary Sudhir Gupta said, “We are coming up with a set of regulatory principles on tariff in a month to 1.5-month’s timeframe,”

Earlier this week, telecom operators huddled together and met with TRAI, in order to discuss issues related to financial mess. And the issue of predatory pricing by Jio was one of the strongest pointers to be raised by all telecom operators.

Earlier, Airtel, Idea and Vodafone had already requested TRAI to implement a minimum call rate, which was dismissed. And, Airtel’s appeal against Jio’s free offers was also rejected.

TRAI Is Against Predatory Pricing? Is This Jio’s Fault?

The matter of predatory pricing by Jio erupted in December last year, when Jio ignored TRAI’s directives and continued to offer free voice and free data.

This was opposed by other telecom operators, who approached TRAI and asked them to stop Jio.

In return, TRAI approached Attorney General of (AG) to resolve this matter, which was unprecedented, because TRAI is the final authority when it comes to telecom services in India. This was necessary as well because Jio was basically breaking a 15-year-old TRAI rule, related to promotional pricing.

However, the reply by the AG changed everything.

After 10 days, the AG said that when it comes to promotional offers, then there exists no limitations on the number of days, or the offer being rolled out. In short, the legal reply from the AG allowed Jio to do everything and anything, in order to garner market share.

The letter from the AG said, “I am of the opinion that the promotional offers, even in respect of a dominant player cannot be subject to principles of non-discrimination, non-predation and IUC compliance,”

This was against all expectations, and former veterans of telecom industry expressed strong opinions on the same.

B.K. Syngal, former chief managing director of VSNL said, “When a tariff – promotional or regular – is filed, it has to comply with the regulatory principles of non-discrimination, non-predation and IUC,”, adding, “The AG says that an operator can go on offering promotional tariffs whether they meet regulatory principles or not, and the TRAI can just be an onlooker. It means that TRAI has no role to play. I am surprised (at) what has happened to the regulator.”

Due to this confusion, and the chaos, TRAI has now decided to make observations on the aspect of promotional offers, and their validity with a new look, and then come out with refined, well-set rules.

We will keep you updated.