Connect with us

Daily News

How TRAI’s Recent Move On Interconnect Fee Is Good For Nothing For Airtel & Vodafone Idea

Early this week, the telecom regulator TRAI (Telecom Regulatory Authority of India) came up with two big decisions for the sector. First, it announced the extension of IUC (interconnect usage charges) on the mobile-to-mobile calls, and on the same day, the regulator floated a consultation paper on setting up floor price for the telecom services in the country.

The decision to extend IUC charges – which are 6 paise per minute currently – has come three months after the regulator floated a consultation paper that attracted 345 comments from the industry. In 2017, TRAI had planned to scrap the IUC charges from January 2020. Instead of following its previous diktat, the regulator floated a paper out of the blue. The move surprised the sector, particularly incumbents Bharti Airtel and Vodafone Idea, who were preparing themselves to let go of a revenue stream.

With the extension of IUC charges by one more year – that is up to December 2020 – the incumbents have been given some relief. How? That’s because incumbents are net gainers in the IUC regime. For instance, Vodafone Idea earned Rs 1,800 crore from IUC between September 2018 and July 2019, as per financial services firm Jefferies. Airtel earned Rs 570 crore during the same period. Jio, on the other hand, is the net loser which reportedly paid Rs 13,500 crore over the past three years towards net IUC charges.

A bigger telco tends to earn more from IUC than a smaller operator because large operators get more incoming voice calls on their network (because of having more subscribers). But as operators reach equilibrium in terms of subscriber numbers, there are no net gainers and losers. During first three years when Jio was not as big as Airtel or Vodafone Idea, it paid large amount to these incumbents but the operators are now reaching a stage where they will have traffic symmetry – which means the number of outgoing calls being equal to incoming calls.

In October, Jio’s outgoing calls (59 per cent) were much higher than incoming calls (41 per cent) whereas for Vodafone Idea, it’s quite the opposite – 56 per cent incoming vis-a-vis 44 per cent outgoing. This resulted in Vodafone Idea being a net gainer. “In absolute terms the net IUC receipts have been on a declining trajectory with Jio gaining subscriber market share,” Credit Suisse said in a report.

But still the telcos are not yet there, TRAI asked for industry’s suggestions, and eventually ruled in favour of incumbents by extending the deadline. “TRAI cited slower-than-expected migration on 4G and the prevailing traffic asymmetry against VoLTE, but also the possibility of an improvement in this imbalance over the next one year,” said Motilal Oswal in a December 17 report.

But there’s a catch with TRAI’s decision. The situation has changed drastically over the past three months when by the end of the October, Jio started charging 6 paise from its subscribers for their calls to other telecom networks (Voda-Idea, Airtel and BSNL). This has changed the traffic patterns. How?

Jio consumers, who were making free calls to other network earlier, are now required to pay (through top-up recharges) for calls to Airtel’s or Vodafone Idea’s subscribers. These subs have reduced their calling frequency and minutes of calls after Jio started billing them. “It’s likely that operators have moved further in the direction of traffic symmetry, and therefore, the traffic flow between operators has perhaps reached a point that is close to symmetry,” says a telecom analyst.

According to Jefferies, Vodafone Idea’s net gain from IUC is expected to be Rs 840 crore for five quarters until December 2020. The equivalent amount for Airtel would be just Rs 200 crore. Compare these numbers with their AGR (adjusted gross revenues) liabilities – Rs 53,038.6 crore for Vodafone Idea and Rs 35,586.01 crore for Airtel – and the so-called relief would seem like a pittance.—Business Today

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!