Telecom Regulatory Authority of India (TRAI) had changed the IUC regulations back in 2017, reducing them by 56%, but now the regulator will scrape these regulations thus hurting revenue opportunity. Going by the voice minutes, the Mukesh Ambani led telecom operator, Reliance Jio Infocomm, has soared ahead of other telcos Bharti Airtel and Vodafone Idea, thus amassing the most share.
As per a new ET Telecom report, the Reliance Jio now has ashare of 36% voice minutes, as compared to Bharti Airtel which has 33.5% andVodafone Idea which has 30.7% share. This re-ranking of the telecom operatorsmeans that Reliance Jio will lose a potential revenue opportunity which comesas a result of the scrapping of interconnect usage charges (IUC). This benefitwould start coming to Reliance Jio in January 2020. To recall, while the sectorregulator was deciding on the matter, Reliance Jio had backed the decision ofthe regulator while the other rival telcos were against it.
Change in IUC Regulations Since 2017
As per the opinion of the analysts, Reliance Jio has alreadybecome the top telecom operator by revenue market share (RMS), and it is on thecourse of becoming the revenue net gainer with the current IUC regulations. Itis also the case that most calls will terminate on the Jio 4G network and thiswould be because of Jio's leadership in the voice minutes and the continuous increasein market share.
To recall, back in 2017, the Telecom Regulatory Authority ofIndia (Trai) had reduced the IUC by 57% down to 6 paise. But, now the Trai isscraping these rules in 2020. This means that Reliance Jio would not haveanything to gain from this as Airtel and Vodafone Idea would not have to payinterconnect usage charges. If you don't know, IUC is paid by the calloriginating telco to the destination operator.
A Jio executive said about this development, "Jio's averagerevenue per user (ARPU) does not recognise IUC. At a time when the world ismoving towards IP based technologies, the cost of voice has come down to afraction of a paisa and customers should enjoy this advantage."
Reliance Jio's Call Minute Market Share Climbs Up
Rajiv Sharma, co-head of research at SBICap Securities saidabout this development, "Jio's termination costs (read: IUC outgo) have startedcoming down sharply," he further added that this is because of the rapidlygrowing market share. He pointed out that as the subscriber share grows, IUCwill become a potential source of revenue for the Mukesh Ambani led telecom operator.
Back in 2017, the industry was divided into two sidesregarding the change in IUC regulations as Bharti Airtel, Vodafone India andIdea Cellular opposing the new rules and Trai and Reliance Jio supporting thenew rules. During that time, the other telcos having 60% of subscribers andhaving most calls ending on their network had to pay increased IUC. In contrastto that, Reliance Jio was a small player in comparison. But come September2018, Jio's minutes market share had gone from 27.2% to 35.74%, whereas Airteland Vodafone Idea's share went from 35.4% and 37.33% to 33.5% and 30.74%respectively.