TRAI Defers Zero-IUC Regime Till 2020-End

India’s telecom operators will continue to pay cross-network call charges for another year—a move that will benefit the two incumbent operators Bharti Airtel Ltd. and Vodafone Idea Ltd.

For domestic calls, the interconnect use charge of Rs 0.06 per minute will now stay till Dec. 31, 2020, the Telecom Regulatory Authority of India said in a media note today. “From Jan. 1, 2021 onwards, the termination charge for wireless to wireless domestic calls shall be zero.”

The telecom regulator had decided to phase out IUC—paid by a carrier for connecting calls of its subscribers to a rival network—from Jan. 1, 2020. In September, however, the regulator floated a consultation paper to seek if there’s any need to revise the date for scrapping IUC as adoption of VoLTE (voice over long-term evolution) technology was much below expectation, and traffic imbalance existed.

“The regulators appropriately stepped in and (realised) the interconnect charge will impact the revenues of two of the major operators,” said Rajan S Mathews, director general of Cellular Operators Association of India. “We hope and are highly optimistic that the regulator will put in place a floor [tariff] which will be a guarantee of sorts for the investors and folks who have put money into the industry.”

The deferment will be a boost for Bharti Airtel and Vodafone Idea. 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. Additionally, this move will be a relief for the two incumbent operators that are burdened by more than Rs 50,000-crore penalties that the Supreme Court ordered them to pay.

But Mukeshi Ambani’s Reliance Jio Infocomm Ltd. had strongly opposed the extension of IUC regime, saying the “retrograde” levy would continue to result in “windfall” gains for older telecom operators. India’s youngest telecom service provider has paid more than Rs 13,500 crore as net IUC to other operators since its launch.

The delay in scrapping the IUC also forced Ambani to go back on his promise of free phone calls. In October, Reliance Jio said it would start charging 6 paise per minute for outgoing calls to other operators to make up for the net losses due to IUC.

The telecom regulator said one of the key reasons for delaying the scrapping of IUC was that the adoption of VoLTE calling, while rapid since the launch of Reliance Jio, has still not reached the required levels. It said about 50 percent of the subscribers still use 2G or 3G technologies and had more incoming calls than outgoing. Doing away with the IUC regime at this point “may adversely affect such large number” of customers, TRAI said.

Also, the regulator expects that by the end of 2020 there would be reduced call traffic asymmetry between telecom operators and the resultant net proceeds from IUC would become negligible. That is when the cost of billing IUC will become more than the net proceeds from IUC. Hence, that would be a suitable time to bring in the Bill and Keep regime to replace IUC, TRAI said.

Shares of Bharti Airtel closed 4.5 percent up ahead of the announcement. Vodafone Idea, too, ended trade 4.5 percent higher. The benchmark BSE Sensex gained 1 percent.

Watch the entire conversation with COAI’s Rajan S Mathews here: