The Telecom Regulatory Authority of India (TRAI) has reduced Termination Charges (TC) for all calls originating from and terminating to Wireless networks to INR0.14 per minute from INR0.20 per minute. In 2009, the Call Termination charges were revised from Rs 0.30 / Minute to rs 0.20 / Minute. As larger operators [A-Vo-Id Operators] are net receivers of these charges, it will have a marginal negative impact on incumbent operators. Direct impact of termination rate cut depends on the balance of off-net incoming and off-net outgoing minutes for an operator. We do note that the net interconnect revenues are not material for the incumbents even as net interconnect costs may be material for some of the challengers.
Now, the challengers can use these savings to either (1) shore up their P&L by retaining these cost savings; there is a good case for this to happen given the precarious financial position of most of the challengers, or (2) become more aggressive in the market by passing on these benefits to the consumers in the form of lower tariffs; this would put pressure on the incumbents to cut their tariffs as well, thereby impacting origination revenues as well. We believe that the challengers [Tata DoCoMo, Aircel, Uninor, etc] would not pass on 100% benefit of lower net termination costs to the consumers this time around. We do see some incremental pressure on voice tariffs, however, and moderate our already modest voice RPM assumptions a bit.