Vodafone, India’s second largest telecom operator has shown concern about the Jio Phone’s impact on the telecom industry. In a letter to Telecom Commission Member (Finance) Anuradha Mitra, Vodafone has addressed this concern along with suggestions to control the impact.
In their letter, Vodafone pointed at Jio, stating, “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,” reported PTI.
The Case
Vodafone along with other telcos was already hit hard by the arrival and sudden growth of Reliance Jio in the telecom sector. Jio not only disrupted pricing but also became one of the fastest telcos to gain a rapid escalation.
With a letter to the Telecom Commission member, Vodafone is addressing the recently launched JioPhone. The JioPhone is going on sale from August 24 at a fully refundable amount of Rs. 1,500. The phone comes with unlimited free voice calling.
The arrival of Jio Phone is being indicated as a big hit to the telecom sector’s revenue by Vodafone. Addressing this concern, the company has also suggested some measure to reduce the pressure on incumbent telecom operators.
Suggestions by Vodafone
In their letter to the DoT, Vodafone has made certain suggestions and requests to reduce the increasing pressure on telecom operators because of Reliance Jio.
Interest Rate on Deferred Spectrum Payments
Vodafone’s primary suggestion/request was a reduction in the Interest rate on Deferred Spectrum Payments. The company has requested a reduction from the current 10% to 6.25% or 6.5%.
Stating this suggestion, Vodafone wrote, “reduction in the interest rate applied for deferred spectrum payments is necessary to reduce burden on operators.”
Reduction in USOF
A reduction from 5% to 3% for the Universal Service Obligation Fund was another suggestion from Vodafone. USOF provides that the resources for meeting the Universal Service Obligation (USO) would be raised through a ‘Universal Access Levy (UAL)’, which would be a percentage of the revenue earned by the operators under various licenses.
Vodafone is seeking to reduce this percentage itself stating, “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.”
Conclusion
Vodafone concluded their letter saying “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”.
Seeing the present scenario created by Reliance Jio, telecom operators are indeed under immense pressure to compete with disruptive pricing. Jio has even caused Vodafone and Idea to enter a merger and has resulted in significant losses to the telecom industry since its entry in the market.
