TRAI’s IUC Extension Might Benefit Jio; Limited Gains For Voda Idea, Airtel

With incoming off-net calls of Reliance Jio hitting over 50 per cent of its total calls with incumbent operators in November end, the decision of the Telecom Regulatory Authority of India (Trai) to extend the Interconnect Usage Charge (IUC) regime for one more year might benefit the new player by letting Jio earn additional revenues, without providing any additional financial benefit to the incumbent operators.

During an open house discussion of Trai in November, Jio had stated that it has achieved symmetry between off-net incoming and outgoing calls with rival operators Vodafone Idea and Bharti Airtel and that the earlier gap had been bridged.

Mobile operators currently pay a termination charge of six paisa per minute for all calls made by their subscribers to a rival network under the IUC regime. Trai had earlier said that this regime would end on December 31, 2019, but later floated a consultation paper for its extension.

Incumbent operators fought a public battle against Reliance Jio for the extension of the regime, while Jio wanted it to end saying that it was only impending the move of consumers from 2G to 4G services.

Sources close to Reliance Jio say that with some of the telcos losing subscribers while it gains around 7-8 million new customers every month, the asymmetry is now over as it will have more off-net incoming calls compared to outgoing calls with incumbent players. The sources point out that till mid-December, incoming calls as a percentage of all off-net calls was up to 52 per cent.

That is why Jio does not have to fork out over Rs 600 crore as it did last quarter for termination charges to incumbent operators and that number will be marginal for the December quarter.

According to TRAI’s calculation, till June, Jio’s off-net incoming calls stood at 35.75 per cent of its total calls with rival operators.

“The telco has seen in normal circumstances a 1 per cent increase in incoming calls per month. However, what has accelerated the process is after Jio announced that its subscribers have to pay the six paisa termination charge per minute over and above its existing tariffs per minute in October through top up vouchers. This has helped in reducing total outgoing calls which were earlier free and unlimited,” said a senior executive close to the company.

Incumbent operators, however, have cited two reasons why the extension is still beneficial. Said Rajan Mathew, Director-General of the Cellular Operators Association of India: “If the IUC regime is eliminated, the topline of incumbents will fall and that is the parameter which analysts look into.

That is because the termination fee is booked as revenues, but without an IUC it will not, as no payment for termination has to be made.” – Business Standard