Telcos Were Divided Over Revision in Off-Net Call Termination Rates

Country’s top cellular mobile operators including Telenor and Jazz have opposed the Pakistan Telecommunication Authority (PTA) ’s decision of revising downward the Mobile Termination Rates (MTR) to Rs 0.50 per minute from the current Rs. 0.70 per minute, as confirmed by the sources.

According to sources, both Jazz and Telenor termed the downward revision in MTR a drastic step that will trigger off-net aggression/price war resulting in lowering the already low tariffs, besides negatively impacting on revenues and profitability.

However, comparative smaller operators including PTCL, Zong, Ufone, and Wateen have supported PTA’s decision while saying that it will ensure a level playing field for all while protecting the commercial interests of smaller operators.

Those in favor said that move will shift the industry to a competition stage where all operators will strive to attract customers by improving the quality of their service, rather than merely having a higher customer base. Just in case if you are wondering, MTR is a price set by the regulator that’s charged for an off-net call by receiving operators and this minimum rate is applied across the industry.

This essentially means that if a call is originated from Ufone and the destination number is on Jazz, then Ufone will have to pay the MTR to jazz.

Decreased MTR will mean cheaper off-net calls for customers, but bigger operators, due to their size, receive more calls as compared to smaller operators, and hence they aren’t happy with the downward revision of the rate.

Due to rupee depreciation, Jazz actually had pleaded that MTR should be revised upward rather than downward, and a detailed analysis is required to include all the demographic, economic, market, and other factors. Pakistan’s economy has undergone a drastic devaluation in currency by more than 60 percent in the last 5 years, the company added.

PTA has revised downward the MTR to Rs. 0.50 per minute from 1st January 2022 against the current Rs. 0.70 per minute. The MTR would be further revised to Rs. 0.40 from 1st July 2022 to 30th June 2023 and would be further revised downward to Rs. 0.30 per minute from 1st July 2023 onwards. The PTA’s decision is in line with its plans that were set earlier in 2018 and were based on telecom policy.

Telenor stated that PTA’s proposal to reduce the MTR to Rs. 0.50 is a drastic step. It would have a deeply negative impact on Telenor’s interconnection revenues and its profitability.

PTA’s proposal builds on the benchmarking study undertaken on a group of countries. Some of which have lower MTR, whereas a number of countries with higher MTR are ignored, said Telenor.

The downward revision will trigger off-net aggression/price war resulting in lowering the already low tariffs to unprofitable levels which will inevitably impact the efforts to improve Quality of Service and coverage, the opposing operators said.

Moreover, amid slow economic growth, inflation, and rupee devaluation, an abrupt reduction in the MTR would further deflate the telecoms market. The MTR rate determined in 2018 proposed a gradual decline through a glide path model from

PTA, in response to opposing operators, said that considering MTR in USD of regional countries, Pakistan’s MTR @ US cents 0.40 per minute is much higher than those of Bangladesh, India, Malaysia, and Sri Lanka that turn out to be US cents 0.16, 0, 0.24 and 0.25 respectively.

PTA added that during consultation in 2018, international Benchmarking results estimated MTR for Pakistan between Rs. 0.18 to Rs. 0.43 per minute, whereas, the Authority reduced the MTR to Rs. 0.70 per minute, therefore, further revision is already over-due since January 2021.

The Authority has included a sufficiently large sample of countries in its analysis and more than half of these countries have higher MTR than Pakistan in absolute USD terms.

Therefore, the sample is representative and have sufficient numbers of countries with higher MTR as well. Moreover, the sample is comparable to the extended sample used in the MTR determination in 2018.

PTA was of the view that lowering MTR will result in facilitating a more competitively neutral framework among the operators. This would allow more competitive and innovative offerings such as free minutes bundles (for both off-net and on-net), which would be great ease and beneficial for the consumers.