IUC is a charge that a telecommunications company pays to another operator when its customers make voice calls to subscribers on the rival network, and these charges are 6 paise per minute.
On Thursday, Reliance Jio announced that calls from its users to other networks in India will be free from Friday, when the IUC regime ends.
“While telcos per se do not offer a mix of on-net and off-net calls, leaving the inbound / outbound fork alone, last year’s TRAI data indicated that the proportion of inbound calls outside of the network 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 limited outgoing calls outside the network and has also gained subscriber market share, while Vodafone Idea (VIL) has lost market share.
Consequently, Jio has now become a net recipient of IUC and VIL a net payer, he said, adding that for Bharti Airtel the combination is now roughly balanced.
“Consequently, the elimination of IUC should result in some EBITDA gains (earnings before interest, taxes, depreciation and amortization) for VIL and some impact for Jio. Whereas, it will be neutral for Airtel,” the note adds.
With Jio’s announcement of making out-of-network calls (outgoing calls to other networks) for free, Credit Suisse said it hopes the company will remove limits on out-of-network calls for all-in-one plans without changing rates. Jio’s IUC recharges would also be redundant and are expected to be suspended, he said.
“This would make Jio’s rates comparable to Bharti Airtel and Vodafone Idea (VIL), whose plans have no limits on out-of-network calls. We believe all-in-one plans are the most popular for Jio and Therefore, we see limited impact from the announcement on Jio as it would not change the price of the plans for consumers, “he said.
However, the elimination of IUC would also result in the loss of business-to-business IUC revenue from other operators from off-network calls that end up in Jio’s network, he added. VIL may see some benefit, being a net IUC payer.
.
