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Business News/ Industry / Telecom/  Jio says calls are no longer free, signals an end to tariff war

Jio says calls are no longer free, signals an end to tariff war

Jio’s move to charge users 6 paise/min for calls to rivals' network will come as a major relief for Airtel and Voda Idea, which have been bleeding because of cut-price tariffs
  • As of June-end, 64% of Jio’s traffic was outgoing. Airtel, Voda Idea could gain if date of scrapping IUC is postponed
  • Scrapping IUC or reducing it would benefit a telecom operator with more outgoing traffic than incoming calls (Photo: Reuters)Premium
    Scrapping IUC or reducing it would benefit a telecom operator with more outgoing traffic than incoming calls (Photo: Reuters)

    New Delhi: Reliance Jio Infocomm Ltd, India’s most profitable telecom operator, will start charging for calls made to rival networks at 6 paise a minute, reneging on a promise to keep voice calls free for its customers and signalling the end of a bruising tariff war.

    The operator said it “has been compelled most reluctantly and unavoidably" to do this following the decision of the Telecom Regulatory Authority of India (Trai) to review the date for scrapping interconnect usage charge (IUC) from 1 January 2020, which has led to regulatory uncertainty.

    “For all recharges done by Jio customers starting today, calls made to other mobile operators will be charged at the prevailing IUC rate of 6 paise per minute through IUC top-up vouchers till such time that Trai moves to zero termination charge regime," Jio said in a statement on Wednesday.

    That Jio will start charging for outgoing calls for the first time will come as a major relief to Bharti Airtel Ltd and Vodafone Idea Ltd, which have been left bleeding financially as a result of the rock-bottom tariffs offered by the Mukesh Ambani-controlled company.

    “This is an indication that the price war is close to its end. This bodes well for both Bharti Airtel and Vodafone Idea as they have been hoping for an upward movement in tariff levels for long," a Mumbai-based telecom analyst said on condition of anonymity.

    Jio, however, will compensate customers by providing free additional data of equivalent value based on the customer’s IUC top-up voucher consumption so as to ensure there is no increase in tariff.

    The move comes three weeks after Trai on 18 September floated a fresh consultation paper to see if there is a need to revise the applicable date for scrapping IUC, given the continuing imbalance in inter-operator traffic.

    IUC, which has been set at 6 paise a minute, is levied by mobile networks handling incoming calls from rival networks.

    Scrapping IUC or reducing it would benefit an operator with more outgoing traffic than incoming calls. As of June-end, 64% of Jio’s total traffic was outgoing. Bharti Airtel and Vodafone Idea would stand to gain if Trai decides to postpone the date of scrapping IUC as these telecom operators get more incoming calls than outgoing.

    “Despite Jio having comparable subscribers with rivals, termination of traffic is skewed in favour of incumbents. Now, even Jio feels it can’t justify this subsidy forever—as they were paying IUC charges, but still keeping voice calls free," Mahesh Uppal, director at communications consulting firm ComFirst India, said. “For Jio consumers, this is not good news as they were used to free calls. Jio starting to charge calls is good for rivals as this is an upward movement in tariffs for Jio customers. This gives some breathing room to incumbents."

    Jio, however, believes that the traffic is asymmetric because rivals have kept 2G voice tariffs high. “The price differential of free voice on Jio network and exorbitantly high tariffs on 2G networks causes the 35-40 crore 2G customers of Airtel and Vodafone-Idea to give missed calls to Jio customers. Jio network receives 25 to 30 crore missed calls on a daily basis," Jio said on Wednesday.

    Bharti Airtel, without naming Jio, said that one of its competitors suggested that Trai reopen this issue, while the regulator had in September 2017 already said it might undertake an exercise to revisit the matter at a later date.

    “Clearly, this off net charge being levied, therefore, is to force IUC to be brought down despite the heavy burden it puts in the receiving network. We are grateful that this very timely consultation paper to reassess IUC has been issued by Trai," Airtel said in a statement on Wednesday.

    “The announcement by one of the telecom service providers today to charge for calls made to other service providers to cover the termination charge of IUC is not only an action of undue haste but it also does not bring out the fact that interconnect is a settlement between operators and not a consumer pricing matter," Vodafone Idea said in a statement.

    Meanwhile, Jio has said these charges will only continue till the time the regulator abolishes IUC.

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    Published: 09 Oct 2019, 10:55 PM IST
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