Indian Telecom Operators followed a “bill and keep” regime for SMS (zero SMS termination rates, in practical terms) for a long time. The incumbents, led by Airtel, decided to impose a 10 paise / SMS termination charge on incoming SMS at various times in the past couple of years. The move was driven by increasing incoming SMS imbalance between the incumbents and the new entrants – as the latter had started selling massively discounted SMS packs in the market and this led to a sharp increase in incoming SMS volumes on incumbents’ networks without them getting compensated for the same.
Incumbents’ decision to change SMS Interconnect [IC] agreements led to several cases in the TDSAT – these were settled in the incumbents’ favor by the TDSAT. SMS IC rates have been at 10 paise / SMS since then.
The Telecom Regulatory Authority of India (TRAI) has stepped in and has recommended 1) that SMS termination (interconnect) rates are no longer under forbearance, and (2) prescribed a 2 paise / SMS termination rate for P2P SMS and 5 paise/SMS for commercial / transactional SMS . Effective Date of implementation is June-01-2013
Impact of TRAI Interconnect Charges of SMS on Airtel / Vodafone Idea
In practical terms, the new regulation means negative revenue/EBITDA impact for the incumbents – Airtel, Vodafone and Idea are net receivers of SMS interconnect and hence, a cut in SMS IC rate to 2/5 paise/SMS from the current 10 paise/SMS implies a 60-70% decline in net SMS Interconnect revenues.
Will the DoT accept TRAI’s recommendations ?