IUC charges scrapping: VIL to benefit most
The elimination of inter-operator IUC charges may result in certain EBITDA (Earnings before interest, taxes, depreciation, and amortization) gains for Vodafone Idea
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New Delhi: The elimination of inter-operator IUC charges may result in certain EBITDA (Earnings before interest, taxes, depreciation, and amortization) gains for Vodafone Idea and some impact for Jio, while it will be neutral for Airtel, according to a 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 January 1, 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.
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 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.
