On Wednesday, RJio announced it would charge its customers 6 paise per minute for calls to rival networks (Mint file)
On Wednesday, RJio announced it would charge its customers 6 paise per minute for calls to rival networks (Mint file)

Jio's decision on IUC positive for industry, say analysts

  • For RJio, this move is expected to drive up revenue by 5%, which would translate into a 10% increase in operating profit, according to Edelweiss Securities
  • Analysts believe the tariff hike is positive for telcos and will provide other operators leeway to hike prices proportionately

Mumbai: Reliance Jio Infocomm’s (RJio) decision to pass on the interconnect usage charge (IUC) for off-net calls (calls to other networks) to its subscribers may enable other operators to raise tariffs too, say analysts.

For RJio, this move is expected to drive up revenue by 5%, which would translate into a 10% increase in operating profit, according to Edelweiss Securities Ltd.

"This works out to a price hike of about 14%. However, we believe that additional charges for off-net calls would disincentivise users to call other operators, which would reduce off-net call volumes for RJio," said Edelweiss Securities Ltd in a note published on 9 October.

Analysts believe the tariff hike is positive for the telecom industry and will provide other operators leeway to hike prices proportionately. Other operators may follow suit, but by simply raising the tariff.

“We believe competition will follow suit, with tariff hikes for their bundled plan subscribers, which should result in an Average Revenue Per User (ARPU) increase of 7 and 4 for Bharti and Vodafone-Idea, respectively," Emkay’s note to shareholders said.

“RJio, on the other hand, will witness an ARPU increase of about 17 following the move," it added.

On Wednesday, RJio announced it would charge its customers 6 paise per minute for calls to rival networks. The Mukesh Ambani-led company was actually passing on the IUC charges to the subscriber.

RJio will recover the IUC for off-net calls from its subscribers at 6 paise a minute via a separate recharge voucher. It would compensate for the hike by offering an equivalent value of data, signalling no effective change in tariffs for subscribers per se.

Analysts view it as a circuitous price hike that may not go down well with subscribers and may prompt a behavioural change among Jio subscribers, discouraging them from making off-net calls.

Close