Vodafone (LON:VOD) has urged India’s government to resist pressure from rival Reliance Jio for a cut in mobile interconnection charges, the Financial Times has reported. The UK telco, which is merging its unit in the country with local provider Idea Cellular, is arguing that the change would benefit the new telecom venture at the expense of incumbents.
Vodafone’s share price has fallen deep into the red in today’s session, having lost 1.84 percent to 215.55p as of 09:35 BST, largely in line with the broader market selloff which has seen the FTSE 100 index tumble 1.33 percent to 7,302.86 points. The group’s shares have lost more than seven percent of their value over the past year, but have added just under eight percent in the year-to-date.
The FT reported yesterday that Vodafone’s chief executive Vittorio Colao had written to India’s telecom minister Manoj Sinha, noting that it was “undesirable for a critical core industry like telecom to be regulated based on the ambition of a new operator”.
Reliance Jio, which has been pressuring rivals with aggressively priced call and data packages, is now pushing the government to slash the mobile termination charge — the fee that India’s mobile operators charge to offset the cost of handling incoming calls, which is paid by the caller’s network operator. A reduction is expected to benefit Jio, largely because it has offered free calls to all subscribers, pushing up its ratio of outgoing calls to incoming ones.
Colao warned New Delhi that giving in to Jio’s demands would undermine the government’s efforts to expand the reach of digital infrastructure, with rival operators forced to shut down “already unprofitable sites in rural India”.
Jio’s arrival forced a change of plans for Vodafone’s India unit, which the FTSE 100 group had been preparing for a Mumbai listing. After taking a €3.6-billion charge on the division in November, however, the telco moved to merge the unit with India’s Idea Cellular.