COAI backs cost-based termination charge

The Cellular Operators Association of India (COAI), the GSM operators’ body, will support a costing formula for mobile termination charges (MTC) that will benefit “efficient operators” rather than existing operators or the new licencees.

The move gains importance as telecom operators are divided over the issue of MTC — with existing operators seeking a hike and the new licencees demanding a reduction.

The present MTC, which is levied by operators on other service providers for terminating calls on their network, is 30 paise per minute.

“As an association we are mandated to follow the established and best practices and have decided to support a costing formula for MTC. This costing formula will be based on forward-looking long-run incremental costs (FL-LRIC) of a telecom service provider,” COAI Director-General TV Ramachandran told Business Standard.

MTC was one of the eight issues discussed at the COAI’s executive committee meeting held in Mumbai yesterday.

Ramachandran said the method would benefit the most “efficient service provider”. The efficiency of the operator could only be decided in the long run, he added.

According to industry experts, FL-LRIC is used in the developed nations, including in the European Union countries. This method is calculated using a number of measures like interconnection tariffs in a competitive environment.

The established telecom operators, like Bharti Airtel, Vodafone-Essar and Idea Cellular, among others, are seeking a 10 paise hike in MTC. But new licencees like Unitech, Datacom Solutions and Loop Telecom are seeking a reduction of 25-50 per cent, sources close to the development say. For existing operators, a hike in MTC will mean an increase in revenue as they expect a rise in the number of calls terminated on their networks as the new operators start launching their services. Most new operators have readied their networks and infrastructure and are set to start operations either by the end of this year or by early next year.

However, the new operators feel that hiking MTC will further burden them at a time their revenues are at the lowest levels.

Meanwhile, the COAI has decided to propose a costing formula based on forward-looking long-run incremental costs (FL-LRIC).