Telcos To Get Rs 13,000 Crore Revenue Boost For Inter-Connect User Charges

Soon after it announced a 6 paise charge per call on other networks, Reliance Jio has stirred a debate on the relevance of inter-connect user charges (IUC). The sector earnings before interest, tax, depreciation, and amortisation (Ebitda) would get a boost, feel analysts.

They are of the view that the domestic telecom sector should focus on value creation rather than value destruction. They also say that as far as the revenue of the three telecom companies is concerned, the sector ebitda could get a boost. “If all operators start charging 6p/minute for all outgoing calls, annual sector revenue and Ebitda can increase by Rs 15,000 crore and Rs 13,000 crore (assuming Q1 traffic patterns) although these numbers will generally trend downwards given gradually balancing traffic patterns,” noted a UBS Global Research report.

The positive Ebitda impact could be 13-15 percent for Bharti Airtel, 55-60 percent for Vodafone Idea and 32-36 percent for Reliance Jio, on the basis of above calculations.

“We hope that the Indian wireless sector can move back to collective value creation from the (creative, to some) value destruction and distribution mindset we have seen for at least the last decade or so,” Kotak Institutional Equities said in its report.―Business Standard