LAHORE - The country’s second largest cellular operator, has quitted the deal of International Clearing House (ICH), due to financial losses of over Rs2.2 billion, putting a question mark over the sustainability of LDI market share agreement.

Market sources said that the international incoming minutes were standing at about 1.3 billion minutes per month during pre-ICH scenario, while now after the ICH agreement, the minutes/moth have dropped to 500 million minutes/month due to higher termination rates.

 “The fall in incoming minutes has coincided with unchanged mobile termination rate which remains at Rs0.90/minute versus the proposed Rs1.2/minute agreed with cellular operators when the ICH was formed.”

Industry experts said that although because of higher LDI margin, LDI segment revenues of the industry have increased but the problem for cellular operators stems from the un-revised mobile termination rates coinciding with the slide in traffic.

This has decreased their overall revenues on international incoming traffic, said Furqan Ayyub, a telecom industry expert.

He pointed out that before the ICH was in place cellular operators were receiving Rs0.90/minute as mobile termination rate where under the ICH agreement they had been proposed to receive Rs1.2/minute but it was never implemented. Moreover, the revised demand of the cellular operators for termination rate is now about Rs2/minute.

Experts said that Telenor’s exit from the ICH has cast serious doubts over the sustainability of the formal price and quota agreement on international incoming minutes.

Note that doubts on the sustainability of the ICH had already crept in after the issuance of an LDI license to Zong in December 2013.

 Experts said that if the ICH collapses completely, intense competition will return to the LDI market, resulting in realized LDI margins declining substantially to 1.25 US cents/minute (vs. ICH rate of 5.85 US cents/minute).

Although this may result in an increase in incoming minutes, it is unlikely to translate into any significant improvement in profitability for LDI operators.

Experts said that Zong had got its LDI license via the orders of the court. It was struggling to get the LDI license by many years ago but was unable to get that due to the contract between the PTCL\Etisalat and government was bound to not issue any LDI license to any one till March 2013.

The company was struggling for this license from its formation since 2008.