Airtel, Idea and Vodafone revenue loss @ Rs. 4.5K Cr, thanks to TRAI’s IUC announcement

It's a big hit for Top 3 operators and they have no other alternative but to look at alternate revenue streams or knock the door of the court

Bharti Airtel, Idea and Vodafone will witness a yearly revenue loss of Rs. 4,500 crore thanks to the recent Telecom Regulatory Authority of India (TRAI) announcement of drop in IUC (Interconnect Usage Charges).

As per industry estimate, the incumbent operators will see a revenue loss of Rs. 4,500 crore thanks to TRAI’s drop in IUC for domestic termination of mobile to mobile charges from Rs. 0.14 to Rs. 0.06 paisa per minute with effect from Ist October, 2017. For other types of calls such as wireline to mobile, wireline to wireline and wireline to mobile the termination charge would continue to remain zero as per TRAI recommendation.

Bharti Airtel will witness the highest revenue loss thanks to its tag of being No 1 in terms of market share followed by Vodafone and Idea Cellular. To compensate for the revenue loss, the incumbent operators will have to look at alternate revenue streams and need to focus on broadband, content and others in a big way.

The incumbent operators will also witness a further hit of Rs. 5,500 crore as TRAI has recommended that mobile termination charges for mobile to mobile calls will reduce from Rs 0.06 paisa to Rs. zero paisa from 1st January, 2020 onwards.

Talking about IUC, Rajan Mathews, director general COAI said, “This is clearly disastrous financially for an industry already reeling under financial pressure. Majority of the operators will certainly seek court relief given the magnitude of the financial loss. Majority of the members will also seek clarity from TRAI on model used, methods, assumptions, and cost parameters used to arrive at their number.”

“Also any indication this will drive down tariffs and benefit customers, is misguided as IUC has no correlation to market prices which are driven by competitive dynamics and IUC,” added Rajan.

Speaking about TRAI’s announcement of drop in IUC charges, Vodafone spokesperson said, “We are disappointed with this decision and are now considering our options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in in its history. This is yet another retrograde regulatory measure that, unless mitigated, will have serious consequences for investment in rural coverage, undermining the government’s vision of Digital India.”

Commenting on IUC, Bharti Airtel spokesperson said, “We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress. The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favour.”

“The sharp drop in the IUC rate will only help transfer part of its cost to other operators, thereby further worsening the financial health of the industry. As part of an industry, which continues to be a critical driving force behind the economic growth in the country, we are genuinely dismayed by this decision,” added Airtel spokesperson.

“We welcome the reduction in IUC to 6 paise by TRAI. We also welcome the B&K model, to be effective from January 2020. The IUC cut has already been delayed by 3 years. With voice calling becoming free, TRAI’s move will provide a level playing field,” said Reliance Communications spokesperson.

The prevailing IUC Regulation was notified on 23rd February, 2015 and came into effect from 1st March, 2015. TRAI issued a Consultation Paper for Review of Interconnection Usage charges on 05.08.2016 to seek the views of stakeholders on various aspects of IUC.

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