Relief for Vodafone Idea, Airtel as Trai defers scrapping IUC levy
The telecom regulator on Tuesday deferred by a year a plan to scrap a levy charged by operators for handling incoming calls from rival networks, offering relief to older telcos that generate a part of their revenue from interconnect usage charges (IUC).
The Telecom Regulatory Authority of India (Trai) will now scrap IUC from January 1, 2021 instead of next month. As a result, operators will continue to earn 6 paise a minute for every mobile call they receive on their networks till December 31, 2020.
The regulator has changed its stance about two years after it decided to scrap the levy from 1 January 2020, a move that older telcos Vodafone Idea Ltd and Bharti Airtel Ltd claimed favoured newer entrant Reliance Jio Infocomm Ltd because its outgoing voice traffic was much higher than incoming. Scrapping IUC would benefit an operator with more outgoing traffic.
Trai’s decision comes as a major relief for Bharti Airtel and Vodafone Idea, which have reported record losses in the quarter ended September 30. Jio, which had 64% of its total traffic as outgoing as of June-end, favoured the levy being scrapped.
A zero IUC, or bill and keep, regime means operators would not make any money for receiving calls on their networks. If the traffic flow among operators is symmetrical, it will not have a negative impact on any operator as it is simply a charge paid by one operator to another.
“Trai regulation to maintain IUC at the current 6p/min for a year is along expected lines and provides the most short-term relief to Vodafone Idea, while Jio would see a temporary adverse impact,” IIFLCAP, a division of IIFL Securities Ltd, said in a note on Tuesday.
“The extension of the IUC regime is a positive for Vodafone Idea from a near-term perspective—in line with the government’s stance of ensuring its financial viability.”
The regulator has cited “inadequate” adoption of 4G technologies for voice calls and asymmetries in inter-operator traffic as reasons for deferring the scrapping of IUC. “At this point of time, it may not be advisable to implement ‘bill and keep’ from January 1, 2020,” said Trai.
“Implementation of bill and keep from January 1, 2020, with present inadequate adoption of 4G technologies by consumers and asymmetries in traffic, may affect the level playing field among service providers and, in turn, effective competition in the market,” said the regulator.
Emailed queries to Jio, Airtel and Vodafone Idea remained unanswered till press time.
Trai had floated a fresh consultation paper on September 18 to examine if there was a need to revise the applicable date for scrapping IUC, given the continuing imbalance in inter-operator traffic.
“This is a welcome step in the right direction,” said Rajan Mathews, director general of lobby Cellular Operators Association of India. “We look forward to continuing support from the government and regulator to address the severe financial stress in the telecom sector.”