The elimination of inter-operator IUC charges might outcome in particular EBITDA gains for Vodafone Idea and some influence for Jio, whilst it will be neutral for Airtel, according to a report.
The zero IUC (Interconnect Usage Charges) regime was previously slated to come into impact from January 2020, but then the telecom regulator deferred its implementation till January 1, 2021.
IUC is a charge that is paid by a telco to one more operator when its consumers make voice calls to subscribers of the rival network, and these charges stood at 6 paise per minute.
On Thursday, Reliance Jio announced that calls by its customers to other networks in India will turn into no cost from Friday, as the IUC regime ends.
“While telcos per se do not give a mix of on-net and off-net calls leave alone the incoming/outgoing bifurcation, TRAI’s data from year ago indicated that share of off-net incoming calls was increasing for Jio (and as a corollary outgoing calls decreasing) as it gained scale,” Credit Suisse stated in its note.
However, because then Jio has capped off-net outgoing calls and also gained subscriber market place share whilst Vodafone Idea (VIL) has lost market place share.
Consequently, Jio has now turn into a net receiver of IUC and VIL a net payer, it stated adding that for Bharti Airtel the mix is roughly balanced now.
“Consequently, elimination of IUC should result in some EBITDA (Earnings before interest, taxes, depreciation, and amortization) gains for VIL and some impact for Jio. Whereas, it will be neutral for Airtel,” the note added.
With Jio’s announcement of creating off-net calls (outgoing calls to other networks) no cost, Credit Suisse stated it expects the enterprise to do away with caps on outgoing off-net calls for all in one particular plans without the need of altering the tariffs. Jio’s IUC leading ups would also turn into redundant and are anticipated to be discontinued, it stated.
“This would make Jio’s tariffs comparable to Bharti Airtel and Vodafone Idea (VIL) whose plans do not have caps on outgoing off-net calls. We believe that all-in one plans are the most popular for Jio, and thus see limited impact of the announcement on Jio as it would not change the pricing of plans for consumers,” it stated.
However, elimination of IUC would also outcome in loss of organization-to-organization IUC revenues from other operators for off-net calls terminating on Jio’s network, it added. VIL might see some advantage, getting a net payer of IUC.