International Long Distance: Opportunities and Drivers

 Government has so far given 23 ILD licences since the opening up of the sector in the year 2002 as on March 2009. The annual license fee has been reduced to 6% of the Adjusted Gross revenue (including the USOF), since 2006 and the roll out obligation for the operator is to set up on ILD gateway within a period of three years. While such policy initiatives mark high growth era in terms of usage, it further puts more emphasis on the increased competition, especially with big ticket telcos like Singtel, BT and Orange jumping into the fray. The great difficulty is that this is one business segment which can not be driven by price fall with controlled ARPU only, rather multiplicity of the carriers push for a tough tightrope walk. Earlier the difficulty was more on bilateral termination arrangement with US operators which had low rate for subscriber usage in their own and were bleeding under reciprocity on account of high rates in India.

 

Market Distribution:

As by end of 2008-09, the market still is largely held by Tata Communications, at 54.6 % market share, followed by Reliance communications at 11.5% and BSNL at 7%.

 

While the market size is quite big (pegged at INR 15000 Crores in 2008-09), with a sharp growth from flat-ish 2006-07 to 2007-08 (from INR 11506 crores to 11532 Crores), with Vodafone, BT and BSNL showing the highest growth (450%, 166.7% and 120% respectively), the pie irrespective of division is big and attractive enough to push every one on the ILD bandwagon. Eventual differentiation will be based on the capability to grow the market, with gaining the market share, and capability to sustain competition on the basis of well oiled global alliances. This is a market battle which will in great part be played outside the country. TRAI has raised the call termination charges for calls terminating on Indian operator’s network from 30 ps per minute to 40 paise per minute to bring in benefit for Indian long distance operators, while for the moment keeping the termination charges for 2G and 3G at the same level based on the inputs collected from the operators as per the notification effective from 1^st of April, 2009.

While the interconnection charges are broadly defined in the tenets of WTO agreement (GATT), 1997, policy wide tweaking is generally permitted in order to ensure that the providers in the country could make profit out of international operations (and passing off some of it towards USOF) and at the same time ensuring that the charges are conducive the overall market environment. IUC consists of Origination, termination charges, Carriage charge and transit charge. Termination charge has been fixed at 0.30 INR per minute. In case of non-availability of direct connectivity, the charge for carrying the traffic through another NLDO is termed as Transit charge which again is left to mutual workability with the ceiling of INR 0.20 per minutes. Carriage charge has been left to forebearance (mutual workability) between the ILDO and Foreign operators. It is the responsibility of TRAI to ensure while by reducing the termination charges it makes connectivity to India easier from overseas, it needs to raised to a level that connectivity to foreign shore from India does not end up as a loss making enterprise for operators (some charging as high as INR 3.00 per minute for termination). In view of this, while this is an extremely attractive market, it is driven much by global market forces and policy directives and the ability to understand and forge better alliances will spell the success.