NEW DELHI: The Telecom Regulatory Authority of India (TRAI) this week made two major announcements that analysts say will have a material positive impact on financial health of telcos, especially Vodafone Idea (VIL) and Bharti Airtel.
First, TRAI’s decision to extend the 6 paise per minute call-handling charge or Interconnect Usage Charge (IUC) for another year will boost the operating profits of Airtel and VIL by 1 per cent and 10 per cent respectively in the next financial year. Six paise a minute may not seem much, but every penny counts for the two telcos.
VIL and Airtel were the worst hit by the Supreme Court’s recent verdict that backed the government’s wider definition of adjusted gross revenue (AGR). The two firms face bills of Rs 53,039 crore and Rs 35,586 crore respectively for pending license fee and spectrum usage charge payments arising from the judgment and will have to cough them up by January 24, according to the SC verdict.
While the imbalance in IUC payments between the two incumbents and Jio is steadily declining, the extension will have a significant impact nevertheless. "The difference between off-net incoming calls versus off-net outgoing calls as of October 2019 was around 12 per cent net off-net incoming for Vodafone Idea, while it was 6 per cent for Bharti Airtel. Jio was the net payer of IUC charges with the difference being 19 per cent net off-net outgoing," said Credit Suisse Securities.
TRAI has also agreed to begin consultations on establishing a floor tariff. If fructified, this would be viewed as a positive outcome for the industry as this could potentially ensure more stable competition, Goldman Sachs said.