Reliance Jio Gunning For Competitors By Incurring ‘Huge Losses’, Says  Vodafone CEO

NEW DELHI – British telecom major Vodafone has petitioned the government for relief with group chief executive Vittorio Colao seeking more time in making spectrum payments while expressing concern over any move to cut the interconnect charges (IUC) or the payment that phone companies pay each other for connecting calls.

The telco also hit out at Muksh Ambani’s Reliance Jio, saying the company has been growing operations on the back of “extreme promotional activity and generated by incurring huge losses.”

Colao’s letter follows a similar move by Bharti Enterprises chief Sunil Mittal and Aditya Birla group Chairman Kumar Mangalam Birla, whose company Idea Cellular is in the process of merging with Vodafone India’s operations.

“We hope that the IMG (Inter-Ministerial Group) will recommend a reduction in the interest rates for deferred spectrum payments to 6.25% in line with the improved macro-economic trends and an increase in the period of payment for spectrum,” Colao said in a letter to Telecom Minister Manoj Sinha. “We are seriously alarmed to see reports that the regulator is considering a reduction in MTC (mobile termination charge or IUC) at a time when the industry is facing such immense hardships.”

The hardships for the older telecom companies began after the aggressive entry of Mukesh Ambani’s Reliance Jio in September last year on free voice and crippling tariff plans.

“Any reduction in MTC risks large-scale site shut-down of already unprofitable sites in rural India and which would greatly diminish the population coverage of mobile telephony,” Vodafone said, adding that at present the industry covers 97% of the population.

Attributing the success in taking telecom services to rural areas to the adoption of Calling Party Pays (CPP) norm in 2003, Colao said nowhere in the world do Bill and Keep (BAK) and CPP regime co-exist, as proposed by Jio.

Stating that the current IUC rate of 14 paise per minute is “below cost”, Vodafone said a further cut risks hitting the companies that have invested to build the industry.

He added that consumers pay for incoming calls in BAK countries, which is unrealistic for India.

The letter also said that Jio’s claims of having a 70% advantage on costs as compared to entrenched operators has “no evidence” and alleged that Jio is incurring higher costs on both employees and infrastructure. Claiming that RJio has assumed continued growth of an “implausible level of paid traffic”, Colao said the present traffic levels are a result of Ambani-led company’s extreme promotional activity and “generated by incurring huge losses”.

Comments are closed