The telecom regulator has said that the termination charges have shown a downward trend, coinciding with a sharp decline in consumer retail tariff rates that has fuelled an explosive growth in the telecom subscriber base, which had swelled to 1.18 billion wireless phone subscribers at the end of July. Reliance Jio, which started its commercial operation past year, has been offering customers voice calls at no charge from day one. In simple words, if you are calling from an Airtel number to a Vodafone number, Airtel is bound to pay IUC to Vodafone as your services connect. Telcos in India don't specifically share their income from IUC charges but it is one of the main sources of their revenues. "Reducing IUC charges is not unexpected as the telecom industry matures and technology progresses and drives costs down". Reliance Communications stance on the matter is in contrast to that of the larger players like Bharti Airtel and Vodafone that have slammed the TRAI's latest decision.
When a call is placed to a particular consumer of the terminating network, the originating network typically has no choice but to purchase the termination service of the terminating operator to which the called party belongs.
IUC cut is definitely positive for Reliance Jio and kind of negative for the incumbents such as Bharti Airtel, Idea and Vodafone, Macquarie said. The solution is not to restore IUC but for the government to scrap or slash its excessive claims on telecom revenue. There are no clear answers.
Shares of telecom companies such as Idea Cellular and Reliance Communications ended the day with losses of up to 3.4 per cent after Trai more than halved mobile interconnection charges to 6 paise a minute. There is interconnection for voice then why not for data"..."They are completely bypassing the telecom operator. In short, the chances of tariffs going down seem improbable.
So the operators that have been charging for voice calls will now witness an impact on EBITDA margins as IUC charges drop from next month.
Mr. Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited elaborates: "At the industry level, IUC is largely a zero-sum but it impacts each operator differently, driven by the extent of traffic asymmetry between them". Vodafone India received equity infusion of Rs 47,700 crore from its parent Vodafone Group previous year - the highest FDI investment in India till date - to buy additional spectrum and to upgrade networks. With IUC gone, profitability for Airtel will be dented. Does that make IUC charges redundant? The TRAI is moving towards a bill and keep approach to enable this.
He added that the telcos would want "details used to arrive at the 6 paise figure".