Call drops: telecom operators fear payout of ₹54,000 cr a year as compensation to users

Telecom companies claim that they could end up paying users as much as ₹54,000 crore per annum as compensation for call drops. This would result either in closure of networks or a rise in tariffs, the telecom operators said in a letter to TRAI seeking a review of its proposal.

TRAI has proposed to give users ₹1 for every call drop.

“The annual industry compensation due to dropped calls may range from ₹10,000 crore in case 10 per cent of subscribers claim compensation to ₹54,000 crore in case 50 per cent of subscribers claim the same. This amount would represent up to 37 per cent of the industry’s annualised adjusted gross revenue in case of 50 per cent claims,” the telecom operators said in a letter to TRAI.

Tariff hike likely “Compensation costs of this magnitude will result in either closure of networks or increase in tariffs,” the letter, addressed to TRAI Chairman R S Sharma, said.

The operators’ bodies — Association of Unified Telecom Service Providers of India (AUSPI) and Cellular Operators Association of India (COAI) — in a joint letter have moved TRAI stating that the authority’s regulation to compensate call drops is “grossly unjust”. This, they say, will negatively impact both consumers and service providers.

On October 16, TRAI made it mandatory for operators to compensate consumers for call drops, effective January 1, 2016. The regulator wanted operators to credit the account of the calling consumer by ₹1, but limited to three dropped calls a day.

“Moreover, even if the call drop rate is 1 per cent (which is within the 2 per cent benchmark prescribed by TRAI), service providers will still be required to provide compensation to the tune of ₹1,083 crore, which is 0.9 per cent of voice revenues,” it added.

Earnings impact As per independent estimates, the regulation will lead to a 3 per cent hit on revenues and 7-8 per cent impact on mobile EBITDA, the letter said. “We believe that the scheme of compensation, far from reducing call drops, will result in a sharp increase in call drops as countless customers will cause the calls to drop to obtain ₹3 per day as compensation,” it said.

To recover the compensation cost, operators will have to hike tariffs leading to customers spending more to purchase telecom services, the joint letter said, seeking withdrawal of the “defective” regulation.