Trai will scrap IUC from 1 Jan, 2021, instead of next month. Jio said a delay in scrapping IUC is unwarranted, anti-poor, and sabotages the govt’s Digital India mission
Trai will scrap IUC from 1 Jan, 2021, instead of next month. Jio said a delay in scrapping IUC is unwarranted, anti-poor, and sabotages the govt’s Digital India mission

Relief for Vodafone Idea, Airtel as Trai defers scrapping IUC levy

  • Telcos will continue earning 6 paise a minute for every mobile call they receive on their networks till 31 Dec, 2020
  • Trai cites ‘inadequate’ adoption of 4G for voice calls, asymmetries in inter-operator traffic as reasons to defer scrapping of IUC

New Delhi: 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 1 January 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 31 December, 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 30 September. 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 1 January 2020," said Trai.

“Implementation of bill and keep from 1 January 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 18 September to examine if there was a need to revise the applicable date for scrapping IUC, given the continuing imbalance in inter-operator traffic.

Airtel and Vodafone Idea, which are currently battling shrinking revenue following a price war triggered by the entry of Jio in September 2016, had then welcomed Trai’s regulatory rethink. Jio, however, said a delay in scrapping IUC was unwarranted, arbitrary and anti-poor, and not only affected the credibility of the authority, but also sabotaged the government’s Digital India mission.

“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."

In September 2017, Trai had ordered a reduction in IUC to 6 paise per minute from 1 October 2017, from 14 paise earlier and abolishing it from 1 January 2020. Local telecom operators, reeling from the fierce price war triggered by the entry of Jio, were hit hard by the order.

Jio is the only pure-4G network in India. Vodafone Idea operates a mix of 2G, 3G and 4G networks. Airtel operates 2G and 4G networks and is in the process of phasing out 3G by March next year.

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