The Hindu Business Line : Consumers to gain from ADC phase-out?

The phase out of access deficit charges (ADC) recommended by the telecom regulator may not have any heavy earnings impact for large private operators; but may allow a lowering of mobile tariffs.

TRAI has recommended a complete phase out of the five-year-old ADC from April 1 this year. ADC was a charge, levied as a percentage of a private mobile operator’s revenues, on all outgoing calls made to the BSNL network. This was to compensate BSNL for providing subsidised tariffs to subscribers in rural areas. After a series of reductions, the ADC now stands at 0.75 per cent of the adjusted gross revenues for telecom operators.

Savings in charges

With this charge now phased out, telecom operators may be left with savings amounting to about 0.75 per cent of their adjusted gross revenues. With operating profit margins for large listed players hovering in the 30-40 per cent band, this may not have a substantial material impact on earnings.

Passing on the savings in ADC charges may enable operators to lower mobile tariffs, which could aid usage. Mobile to landline tariffs may be the key beneficiary of this change. Alternatively, retention of these savings could help to some extent in stemming declining ARPUs.

ADC is part of the interconnect usage charges, apart from origination, carriage and termination charges. The regulator has also proposed that the ADC paid by international long distance (ILD) operators at the rate of Re1 per minute on all incoming calls, be halved to 50 paise immediately, and phased out by end of September this year. This may allow prominent ILD operators in India such as Bharti Airtel, Tata Communications, and Reliance Communications to offer more competitive tariffs to international players seeking access to their network.

The TRAI recommendation also envisages payment of Rs 2,000 crore from the Universal service obligation fund to BSNL for three years.

This may allow BSNL to continue to offer subsidised tariffs in rural areas, which private operators may find it difficult to match.

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