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Jio's move to recover IUC from voice calls to boost operating income of Big 3 telcos: IIFL

The IIFL Institutional Equities estimates an Ebitda upside of 10% , 50% and 8% for Jio, Vodafone Idea and Airtel respectively in FY21, if the telecom regulator keeps interconnect usage charges at 6 paise per minute till FY21 at least.

ET Bureau|
Oct 16, 2019, 05.00 PM IST
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Last week, Jio said it was compelled to start charging its over 350 million users to recover the 6 paise a minute IUC it pays to other telcos, till Trai brings the fee down to zero.
KOLKATA: Reliance Jio's decision to charge users for voice calls to subscribers of other phone networks is likely to trigger Ebitda or `operating income’ growth for the Big 3 telcos, especially if the sector regulator defers implementation of the zero-IUC regime till FY21, analysts said.

IIFL Institutional Equities estimates an “Ebitda upside of 10% , 50% and 8% for Jio, Vodafone Idea and Bharti Airtel respectively in FY21,” if the Telecom Regulatory Authority of India (Trai) keeps interconnect usage charges (IUC) at 6 paise per minute till FY21 at least, and the older carriers replicate Jio’s pricing.

The brokerage, however, expects the Mukesh Ambani-led telco to see maximum decline in volume of outgoing off-net voice minutes, following its decision to recover IUC for outgoing voice calls to non-Jio mobile numbers. "The decline in outgoing traffic would be the highest for Jio, followed by Airtel and Vodafone Idea," it said.

IUC is a charge paid to a telco on whose network a call terminates and has been a bone of contention among the private phone companies and the sector regulator. Two years ago, Trai had cut it down from 14 paise a minute to 6 paise a minute and decided to scrap it from January 2020. But it recently sought views on deferring the implementation of zero-IUC, on grounds that millions of subscribers had still not moved to Voice over LTE (VoLTE), or a data-based network that was expected to lower the cost of generating a call, rendering IUC redundant.

Jio, which is a net payer of IUC, has opposed any move to defer the zero-IUC regime, and has criticised Trai, calling its IUC review process a retrograde step that would harm mobile users and punish efficient operators. Last week, it said it was compelled to start charging its over 350 million users to recover the 6 paise a minute IUC it pays to other telcos, till Trai brings the fee down to zero.

Airtel and Vodafone Idea, which are net revenue earners, want IUC to stay.

Morgan Stanley though estimates that over the “next 12-to-24 months, Jio coud become a net receiver of IUC,” given that its subscriber base is increasing and the number of calls from its network to other mobile networks has been dropping.

In such a potential scenario, “Jio wouldn’t need to recover IUC from customers anymore,” the brokerage said.

It further added that “Jio’s incoming off-net (voice traffic) as a percentage of total off-net voice traffic on the telco’s network rose from 8.73% in April 2017 to 35.75% in June 2019,” citing Trai data.

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