The Telecom Regulatory Authority of India has released a consultation paper to review the deadline to bring down the interconnect usage charge to zero. The move will be positive for Bharti Airtel as well as Vodafone Idea but negative for Reliance Jio.

Currently, an operator is required to pay 6 paise per minute as mobile call termination charges, called interconnect usage charges (IUC), which is proposed to be made nil from January 1, 2020.

However, this will be only seen as a temporary relief because at some point of time Trai will move towards bringing termination charges to zero.

According to Citi, the biggest relief will be for Vodafone Idea because the telecom operator earned 30 percent of its overall EBITDA in the first quarter from IUC.

For Airtel, it is positive but the impact will be less compared to that of Vodafone Idea because the IUC contributed less than 10 percent to Airtel's India mobile business EBITDA in Q1. Airtel's India mobile biz itself accounts for 35 percent of the consolidated EBITDA.

For Reliance Jio, the IUC contributed about 18 percent of Jio’s Q1 EBITDA which is about 22 percent of Reliance consolidated EBITDA.

Citi further noted that the rationale behind Trai's plan to bring down IUC to zero was that with the rising proportion of voice traffic transitioning to 4G VoLTE, which has negligible termination costs, there was little justification in continuing with these charges.

Trai is now considering to postpone the effective date of the revision, citing that the lack of migration on 4G and the imbalance of off-net traffic between operators, according to Motilal Oswal.

Citi noted that "even though the off-net incoming:outgoing traffic asymmetry has been decreasing across the operators, it still prevails (60:40 for Voda Idea, 55:45 for Bharti, 35:65 for Jio)."

Disclosure

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First Published:Sept 19, 2019 9:20 AM IST