Telecom stocks fall on Trai's call drop penalty reminder

MUMBAI: Telecom shares fell sharply on Monday amid soft markets across the board after the Telecom Regulatory Authority of India (Trai) reminded operators of its directive to penalise dropped calls.

Although companies have challenged the directive in court and are hopeful of a favourable award, investors believe the penalty poses a significant threat to profitability, especially for incumbent operators.

Shares of Bharti Airtel fell 4% to Rs 326.80, Idea Cellular fell 5.31% to Rs 135.60 and Reliance Communications fell 6.6% to Rs 84.65.

In October the regulator had proposed to penalise telecom operators for dropped calls by forcing them to reimburse users Rs 1 for every dropped call.

The telecom industry cited a potential loss of Rs 54,000 crore a year from the Trai mandate.

Telecom analysts at Credit Suisse had estimated that the regulation could shave off close to 3% of revenue and 7-8% of Ebitda on mobile operations at telecom operators.

Moreover, its implementation was fraught with troubles, for example identifying which network was responsible for the call drop, the originating or the terminating one. Thereafter industry experts argued the penalty empowers consumers to defraud the system.

Trai chief R S Sharma said the penalty figure is capped at Rs 3 a subscriber a day, in an interview.