TRAI Set To Remove Interconnect Usage Charge For Ever; Others’ Loss Is Jio’s Gain
TRAI plans to scrap IUC in a phased manner.
Interconnect Usage Charge or IUC has been the bone of contention for existing telecom players, ever since Reliance Jio came into picture.
IUC is right now capped at 14 paisa per minute, and accounts for a considerable portion of revenues for telecom players.
Telecom Regulatory Authority of India (TRAI) is now considering to abolish IUC for ever, which can prove to be a big booster for Jio. If IUC is scrapped today, Jio will automatically gain Rs 6000 crore+ of revenues every year.
On the other hand, other telco’s such as Airtel, Idea and Vodafone may lose the same Rs 6000 crore+ every year.
Telecom battle has just become more exciting.
TRAI’s Master-Plan: Scrap Interconnect Usage Charge In A Phased Manner
As per reports coming in, TRAI will first cut 50% of IUC, and make it 7 paisa per minute from 14 paisa per minute currently.
After this, IUC would be reduced to 3 paisa per minute, and then eventually be abolished all together.
TRAI will gauge the financial implications of reducing IUC in every stage, and then subsequently take the final decision by end of the month.
Jio Would Rejoice, But Other Telcos May Incur Massive Loss
Right now, IUC accounts to approximately 14-20% of revenues of existing telecom players. For instance, Airtel generated 14% of their overall domestic wireless mobility revenues from IUC, whereas Idea generated 18% of the income from IUC.
If IUC is cut by 50% today to 7 paisa per minute, then telcos such as Airtel, Idea and Vodafone will lose Rs 3360 crore annually, and if IUC is reduced to 3 paisa, then the loss would account to Rs 5280 crore per year.
And if scrapped all together, then the loss would be Rs 6720 crore per year.
And these losses would convert into boost in revenue for Jio.
In fact, Jio has repeatedly asked for termination of IUC charges, describing it as “an artificial barrier created by incumbent operators with legacy technologies”.
On the other hand, other telecom players have been asked TRAI to increase IUC, and make it at least 35 paisa per minute, to boost their revenues.
In May, 2017, TRAI had outright rejected demands by Airtel, Idea and Vodafone to increase IUC describing this demand as anti-customer, and against free market principles.
Bank Of America-Merrill Lynch report stated that revenues of Airtel, Idea and Vodafone may be impacted in the range of 6-15%, if IUC is scrapped today. Whereas, HSBC in their report said, “Jio’s business model works best in a zero IUC regime as it offers unlimited data and free voice, while its margins are capped when the IUC is above zero.”
What will TRAI do now? Do you think IUC should be scrapped? Do let us know by commenting right here!