Jio charge on voice calls to boost earnings

Jio had announced on Wednesday that it will begin charging customers for outgoing calls made to rival networks at six paise a minute to recover the interconnect usage charge applicable on such calls.

Published: 11th October 2019 07:52 AM  |   Last Updated: 11th October 2019 07:52 AM   |  A+A-

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For representational purposes

Express News Service

NEW DELHI: Reliance Jio’s decision to charge customers six paise per minute for voice calls made to non-Jio numbers is the latest shot fired against the incumbents — Bharti Airtel and Vodafone Idea.

While some analysts say the move is a positive for all telecom operators, since it would allow incumbents to increase tariffs, others note that this would give Jio an upper hand in both the financial and regulatory fronts.

ALSO READ: Jio to charge users 6 paisa per minute for voice calls made to rival phone networks

Bharti Airtel’s and Vodafone Idea’s immediate protest against the announcement only buttresses the latter argument, despite both firms’ share prices rising by more than five per cent on the bourses on Thursday.

Jio had announced on Wednesday that it will begin charging customers for outgoing calls made to rival networks at six paise a minute to recover the interconnect usage charge (IUC) applicable on such calls.

It said it was being forced to do so in light of the sector regulator TRAI calling for a review of its plan to phase out the IUC by January 2020.

Any extension of the IUC regime would be deleterious to Jio’s finances since it has a significant net outgo due to IUC, which was over Rs 750 crore during Q1. On the other hand, Airtel and Vodafone are net receivers of this charge.

ALSO READ: Jio's action an undue haste, IUC not a consumer pricing matter, says Vodafone Idea

Edelweiss said, Jio stands to gain 5-10 per cent in terms of revenue and EBITDA from the move. In fact, CLSA says that if Jio had charged for gross IUC charges during Q1, its EBITDA during the quarter would have risen by 41 per cent.

And, if Jio’s rivals follow suit and begin charging for IUC, they also stand to gain significantly.

But, industry insiders note that by linking the hike in voice call tariffs to TRAI’s decision to review the end of IUC regime next year, Jio is placing pressure on the regulator to stick to its original plan.

ALSO READ: Airtel, Vodafone shares rise after Jio's move on call connect charges

“If Jio is able to get the IUC regime out, it would have a negative impact on both its rivals, who have received over Rs 13,000 crore in IUC charges from Jio over the last three years,” an industry executive noted.

Extension of IUC regime

It would be deleterious to Jio’s finances since it has a significant net outgo due to inter-connect usage charge (IUC), which was over J750 crore during the first quarter of current financial year

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