India Access Fee May Be Cut More If User Growth Good

NEW DELHI -(Dow Jones)- Further cuts in fees levied on phone calls in India are likely if the first round of fee reductions announced Thursday by the telecoms regulator spur the desired growth in the subscriber base.

"In the next three-to-six months, we will watch the subscriber data very carefully. If growth meets our expectations, we may reduce the Access Deficit Charge further," Pradip Baijal, chairman of the Telecom Regulatory Authority of India, told reporters about an hour after the cuts were announced.

Cuts in the levy are expected to cut call tariffs further and increase telephone penetration in one of Asia's most-poorly-networked countries.

The three-layered levy structure for domestic calls - ranging from INR0.30 to INR0.80 a call depending on distance - was replaced by a flat fee of INR0.30.

The fee on incoming international calls was cut to INR3.25 a call, while outgoing overseas calls will have a levy of INR2.50 a call. Both categories of overseas calls previously had a fee of INR4.25 a call.

Baijal said the cuts would help increase the penetration of telephones and promote greater use.

"I am very hopeful that we will be able to have 150 million mobile users in 2007," Baijal said. The Indian government has a bullish forecast of 200 million mobile telephones by the end of 2007 from just over 45 million now.

Baijal said growth of mobile phones is catching up in rural India as more and more people find the low tariff levels very attractive. Indian tariffs are one of the lowest in the world, with some call charges as low as INR0.80 a minute.

Income from levies won't fall due to the rapid expansion of the subscribers base, Baijal said.

"Approximately INR50 billion (a year) was the collection in the earlier regime and the same can be expected in the current regime," he said.

The levies are used primarily to subsidize the uneconomical rural and remote networks of state-run company Bharat Sanchar Nigam Ltd.

-By Ruchira Singh; Dow Jones Newswires; +91-11-2307 4020; ruchira.singh@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 6th January 2005