TRAI Defers Scrapping Of IUC Charges By A Year To January 2021

Telecom regulator Trai has extended by a year the termination of the interconnect usage (IUC) charge, providing relief to wireless operators.

The termination of the IUC charge, the fee paid by one mobile telecom operator to another when its customers make outgoing calls to the other operator’s customers, was due to take effect from January 2020.

That means India’s telecom operators will continue to pay 6 paise a minute charge on all voice calls to other networks up to December 31, 2020, Trai said in a notification. From January 1, 2021 onwards, termination charge shall be zero, it said.

Incumbent telecom players, including Vodafone Idea and Bharti Airtel, had sought 1-2 years before the IUC charges would be terminated. Reliance Jio, which pays the least IUC, also known as termination charge, had batted for an end to IUC charges after December 2019.

Vodafone Idea and Bharti Airtel earn more than what they pay under IUC while Jio pays more than what it earns from IUC. Up to 30 percent of Vodafone-Idea’s Ebitda and 7-8 percent of Bharti Airtel’s Ebitda was drawn from IUC as of the second quarter of FY20. Reliance Jio has paid about Rs 14,000 crore as IUC dues to incumbent players.

Earlier this month Vodafone Idea chairman, billionaire Kumar Mangalam Birla, said the cash-strapped telecom company will have to shut shop if the government doesn’t provide relief that it has sought.

In November, Bharti Airtel and Vodafone Idea warned that their ability to operate would depend on urgent relief from the government, after the Supreme Court upheld a demand by the telecom department that telecom companies pay overdue levies and interest.

Telecom companies have until January to pay at least $13 billion in dues to the state following that court ruling in October. The sector got some respite when the government allowed operators to defer upcoming spectrum payments for the next two financial years until March 2022.

Trai issued a consultation paper in September to discuss a timeline for removal of IUC. The regulator’s rationale was that consumers were yet to fully migrate from voice to data and the imbalance in voice traffic among operators persisted.

That paper sought industry views on the need to revise the date for scrapping the IUC. That action forced Jio charge customers 6 paise a minute to customers.

Reliance Jio,  India’s biggest telecom operator, is eventually expected to benefit from IUC charges once it secures an even greater market share.  Jio decided to recover the IUC charge of 6 paise a minute for mobile voice calls to other operators from customers from October 10 to December 31, 2019, the earlier deadline for the end of IUC.

Jio then said it “assures its 35 crore customers that the 6 paise per minute charge on outgoing off-net mobile calls shall continue only till the time Trai abolishes IUC, in line with its present regulation”. Zero IUC regime is in the best interest of consumers and the huge number of missed calls is creating the wrong perception of an asymmetric traffic, it said.

Now Trai’s decision to postpone the termination of IUC charges to January 2020 is expected to benefit Jio.

In September 2017, Trai recommended the introduction of a phased removal of IUC charges to soften the financial blow to incumbent operators Bharti Airtel, Vodafone and Idea (which were separate companies then). A month later, Trai cut IUC to 6 paise a minute from 14 paise, with the aim of making this zero from January 1, 2020.

Incumbent players were not happy and said Jio’s free voice call creates an imbalance. – CNBC TV18