Delhi High Court has ordered telcos to adhere to TRAI?s call drop compensation mandate today, wherein telcos will need to pay subscribers for dropped calls, effective immediately. According to the guidelines, telcos will pay subscribers Rs1 per call dropped, capped to three call drops per day. As expected, the Cellular Operators Association of India (COAI) has stated that they are disappointed with the order and may look to file an appeal with the Supreme Court. We believe that call drops are primarily a spectrum-related issue, especially during peak periods in the top 20 cities in India.
In our view, the impact is incrementally negative for telcos if the TRAI mandate is enforced. Our scenario analysis suggests a revenue impact of 1.8% for Bharti Airtel and 1.9% for Idea Cellular, if we assume ~6% subscribers claim of Rs2 per day.
