Zero IUC regime: What is IUC, how it will impact Airtel, Reliance Jio and Vodafone Idea

The elimination of inter-operator IUC charges may result in certain EBITDA gains for Vodafone Idea and some impact for Jio, while it will be neutral for Airtel, according to a Credit Suisse report. The zero IUC (Interconnect Usage Charges) regime was previously slated to come into effect from January 2020, but then the telecom regulator deferred its implementation till 1 January 2021. IUC is a charge that is paid by a telco to another operator when its customers make voice calls to subscribers of the rival network, and these charges stood at 6 paise per minute.

Ajai Puri, COO, Bharti Airtel said in a statement:

“At Airtel, we are obsessed with delivering the best-in-class experience to our customers. Airtel mobile customers already enjoy unlimited free calls to all networks with our prepaid bundles and postpaid plans that also offer large dollops of high-speed data. In fact, Airtel has never charged its customers separately for IUC and the unlimited calling benefits will continue for our customers without any change.”

Further, Airtel has also released a statement on its website that while Telecom Regulatory Authority of India (TRAI) continues charging 6 paise per minute as Interconnect Usage Charge (IUC), Airtel will be offering free outgoing
calls to other operators.

The website reads:

“While some operators have made changes to their call charges, Airtel steps up to assure its customers of free outgoing calls. TRAI continues with its decision to charge 6 paise per minute on outgoing calls to other operators. The original Airtel bundle plans include all charges, and thus, the users will incur no IUC charge and can make outgoing calls to other networks for free. Airtel’s unlimited calling plans will consist of all the offers that the plan cites.”

 Zero IUC regime: What is IUC, how it will impact Airtel, Reliance Jio and Vodafone Idea

Airtel logo on a kirana shop in India.

On Thursday, Reliance Jio announced that calls by its users to other networks in India will become free from Friday, as the IUC regime ends.

“While telcos per se do not give a mix of on-net and off-net calls leave alone the incoming/outgoing bifurcation, TRAI’s data from year ago indicated that share of off-net incoming calls was increasing for Jio (and as a corollary outgoing calls decreasing) as it gained scale,” Credit Suisse said in its note.

However, since then Jio has capped off-net outgoing calls and also gained subscriber market share while Vodafone Idea (VIL) has lost market share. Consequently, Jio has now become a net receiver of IUC and VIL a net payer, it said adding that for Bharti Airtel the mix is roughly balanced now.

“Consequently, elimination of IUC should result in some EBITDA (Earnings before interest, taxes, depreciation, and amortization) gains for VIL and some impact for Jio. Whereas, it will be neutral for Airtel,” the note added.

With Jio’s announcement of making off-net calls (outgoing calls to other networks) free, Credit Suisse said it expects the company to do away with caps on outgoing off-net calls for all in one plans without changing the tariffs. Jio’s IUC top ups would also become redundant and are expected to be discontinued, it said.

“This would make Jio’s tariffs comparable to Bharti Airtel and Vodafone Idea (VIL) whose plans do not have caps on outgoing off-net calls. We believe that all-in one plans are the most popular for Jio, and thus see limited impact of the announcement on Jio as it would not change the pricing of plans for consumers,” it said.

However, elimination of IUC would also result in loss of business-to-business IUC revenues from other operators for off-net calls terminating on Jio’s network, it added. VIL may see some benefit, being a net payer of IUC.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost

With inputs from PTI