IoT/Industry 4.0, Technology

RIL Surges 4% After Telecom Regulator Slashes Interconnect Charges

Telecom regulator TRAI on Tuesday said that interconnect usage charges (IUC) for mobile calls will be cut to 6 paise a minute from 14 paise, effective October 1. It then plans to abolish the fee entirely from the start of 2020.

Shares of Reliance Industries surged around 4 per cent to Rs. 872 today after telecom regulator TRAI (Telecom Regulatory Authority of India) more than halved a fee mobile operators pay each other for calls from one network to another. Reliance Industries’ telecom venture, Reliance Jio, which has shaken up the sector by offering free calls and cheap data plans, is likely to gain from the move. On the other hand, other operators like Bharti Airtel, Vodafone and Idea Cellular are likely to take a hit. Shares of Bharti Airtel fell more than 6 per cent while Idea tumbled 7 per cent at their day’s lows. During the consultation process, Jio had questioned the interconnect charges, saying that incumbents had already recovered their investments.

Operators do not charge customers for incoming calls, but the carrier from whose network a call originates pays the network that receives the call. The top players with the highest number of subscribers tend to gain from the fees. The Telecom Regulatory Authority of India on Tuesday said that interconnect usage charges (IUC) for mobile calls will be cut to 6 paise a minute from 14 paise, effective October 1. It then plans to abolish the fee entirely from the start of 2020.

Vodafone India, the second-biggest carrier, described the move as “retrograde” and said it could affect investment in network coverage in rural areas.

A Vodafone India spokesperson said: “We are disappointed with this decision and are now considering our options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in in its history. Unless mitigated, this decision will have serious consequences for investment in rural coverage, undermining the Government’s vision of Digital India.”

Bharti Airtel also expressed disappointment over the regulator’s decision. In a statement, Bharti Airtel said: “We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress. As part of an industry, which continues to be a critical driving force behind the economic growth in the country, we are genuinely dismayed by this decision.”

The Cellular Operators Association of India, which counts Bharti Airtel, Vodafone India and Idea Cellular among its members, said that incumbent carriers would take a severe hit from the reduction to interconnect fees.

“It’s going to exacerbate the financial condition of the industry,” said the association’s director general, Rajan Mathews, referring to falling profits and high debt resulting from costly airwave auctions and a brutal price war.

That backdrop has already kick-started sector consolidation, with Vodafone India and Idea having agreed a merger, while smaller carriers Reliance Communications and Aircel are combining their mobile operations.

At 11:12 am, shares of Reliance Industries were up 1.6 per cent while that of Idea were down 2.7 per cent. Bharti Airtel shares had recouped all the early losses and were trading in the green. In comparison, the BSE benchmark index – Sensex – was trading flat. (With Agency Inputs)

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