Advantage Jio: Trai cuts IUC to 6 paise per minute from October 1

Charges to be zero in two years; incumbents set to move court

LATEST NEWS : In a fresh blow to incumbent mobile operators, including Bharti Airtel and Vodafone, the Telecom Regulatory Authority of India (Trai) has cut the interconnect usage charges (IUC, also known as terminating charges) by 57 per cent to 6 paise per minute effective October 1, from 14 paise currently. In two years, the charges would come down to zero, meaning there won’t be any payment for calls landing on other telcos’ networks.

The new charges are being seen as a relief for the latest entrant, Reliance Jio. It is estimated to save about Rs 3,800 crore annually from this move.

However, the reduction is likely to hit the profitability and revenues of the incumbents further. Analysts at HSBC said in a recent note that a significantly lower IUC would be a boost for Jio and there may be some more pricing disruption after downward revision of IUC rates. Jio has, since its launch last year, paid about Rs 3,000 crore as IUC to incumbents. Ebitda margins for Jio, which are in the negative currently, will turn positive at about 7-8 per cent over the next two years, given the cut in IUC, analysts said.

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