Disadvantage Jio — Airtel and Vodafone Idea will continue to charge for calls on their network
Business Insider India
- The Telecom Regulatory of India will not eliminate interconnect usage charges (IUC) on 1 January 2020.
- Reliance Jio, Bharti Airtel and Vodafone Idea will continue to pay 6 paise per minute for calls to other networks.
- While this may be good news for Bharti Airtel and Vodafone Idea, Reliance Jio is likely to bear the brunt/
One of the ways that telecom operators generate revenue is by collecting IUC. It basically means that the network where the call originates has to pay the network of the call destination a small toll of using the latter’s bandwidth.
In an ideal situation, especially since there are only three players in the market — Reliance Jio, Vodafone-Idea and Bharti Airtel — these charges would even out. But, that isn’t the case.
Reliance Jio gets the short end of the stick with more than half the calls on its network — 64% — going off-network, according to an India Ratings report. Whereas Vodafone-Idea and Airtel subscribers only call off-network 41% and 45% of the time.
Why calls are no longer unlimited on Reliance Jio
The disbalance ends up making Jio the net payer of expenses, while its competitors end up being the net receivers. It’s also why Airtel and Vodafone-Idea can afford to offer free unlimited calling. Reliance Jio, on the other hand, has to limit the number of free IUC minutes it can offer its customers.
Good news for Airtel and Vodafone-Idea
The decision to let the telecom industry collect IUC means that Airtel and Vodafone-Idea will continue to earn 6 paise per minute for calls on their network until 1 January 2021. The influx of revenue will provide some relief for the operators who first had to face Jio’s tariff war on data and then the S upreme Court judgement on adjusted gross revenue (AGR).
The Department of Telecommunication (DoT) is reportedly also looking into pending license fees under the expanded of AGR that Airtel may owe for the telecom companies it acquired — Videocon Communications and Aircel.
Meanwhile, the company is heading up a $3 billion fundraising programme across Singapore, Hong Kong, the US and Europe to meet its global investors and get more resources.
Looking to the government to help
AdvertisementAirtel and Vodafone-Idea appealed to the government to set a floor price for calling charges — a move that TRAI has been hesitant to initiate. It feels that since the telecom industry recently hiked its tariffs, and free to do so again in the future, that is there no need to set a minimum price.
Minister of Commerce and Industry, Piyush Goyal, also stated that the department can’t act out of step against the government to save the telecom industry. “Government proactively or suo motu cannot take an action on this (AGR) but I assure you that we are in continuous dialogue,” he said.
It hasn’t helped that Vodafone CEO Nick Read’s remarks were misinterpreted and reported as the company wanting to ‘exit’ India due to the AGR dues — invoking disapproval from the government. Telecom Minister Ravi Shankar Prasad said that didn’t ‘appreciate’ such statement and that ‘no one should dictate terms’ on India.
While things may look grime for Reliance Jio, experts feel that it will continue to be a market leader for the next two years. “Jio’s dominant position in terms of market share growth and data usage will sustain comfortably for the next 18-24 months, given its superior data speeds and 4G network coverage, even post change in tariffs,” according to Centrum Institutional Research.
Three reasons why the Indian telecom sector's troubles went from bad to worse in the last 24 hours
AdvertisementMukesh Ambani’s Reliance Jio has ‘unlimited’ access to finance, says Airtel top boss Sunil Mittal in his clarion call for government support
It’s advantage Reliance Jio after Supreme Court verdict drains Airtel and Vodafone
Popular on BI
- Venus Pipes & Tubes gains 3% on listing but falls short of analyst forecasts
- IPL 2022 first play-off match GT vs RR: Checkout the important players to watch out in today’s match
- Delhivery makes a tepid debut on exchanges as it rises 1% on listing day
- Cotton seed price rise is making life tough for dairy farmers who use it as cattle feed
- Foreign investors have pulled out more money this year than they brought in between 2009-2021