Airtel, Vodafone Idea Stand To Benefit From TRAI’s Rethink On IUC
TRAI has floated a consultation paper on review of IUC, given that the adoption of VoLTE technology is much below expectation.
The telecom regulator may defer scrapping call-connect charges, nearly two years after it decided to phase out the fees starting 2020. And the nation’s two incumbent service providers—Bharti Airtel Ltd. and Vodafone Idea Ltd. are expected to benefit.
On Wednesday, the Telecom Regulatory Authority of India floated a fresh consultation paper to see if there’s a need to revise the date for scrapping interconnection usage charges, given the adoption of VoLTE (voice over long-term evolution) technology is much below expectation, and traffic imbalance—albeit reduced—still exists.
The TRAI consultation paper also sought to discuss with stakeholders what parameters should be looked at to decide on an alternative date, if any.
A telecom operator pays IUC charges for connecting calls of its subscribers to a rival network. For instance, Reliance Jio Infocomm Ltd. will have to pay a fee for every call its subscriber makes to an Airtel user, and vice versa.
In 2017, the telecom regulator cut IUC charges to Rs 0.06 per minute from Rs 0.14 per minute and had decided to abolish the charges from Jan. 1, 2020.
If the scrapping of IUC is deferred, it will benefit Airtel and Vodafone Idea in the short term. That’s because telecom operators with large number of subscribers gain from IUC as most of the calls are made within their network and they earn a good share of revenue from incoming calls from other networks. But Reliance Jio, which has fewer active users compared to peers, continues to remain a net payer.
In the quarter ended June, Airtel and Vodafone Idea received Rs 250 crore and Rs 380 crore, respectively, as IUC. Reliance Jio paid close to Rs 720 crore.
Though incumbents are set to benefit in the interim, Reliance Jio may benefit in the long run. In 2017, Reliance Jio gained from lower IUC as its customer base was small and calls originating from its network were more. But as its customer base increased, payments toward IUC declined and could turn positive over the next few quarters. Thus, if there is a long delay in implementing zero IUC, Reliance Jio stands to gain.