Fitch Ratings said TRAI’s decision to cut IUC by 57 percent will result in a transfer of $500 million -$600 million per year from incumbents to Reliance Jio.

Indian telecom operators such as Bharti Airtel, Idea Cellular, Vodafone, among others pay the MTR when one of their customers makes a voice call to a user on another network, with the fee going to the operator on which a call terminates.

Mobile operators with large subscriber bases tend to be net recipients of these interconnection fees. Bharti Airtel alone received about $75 million in interconnection revenue from Reliance Jio in April-June 2017.

Fitch Ratings said the financial performance of India’s main incumbent telecoms will be undermined by the telecom regulator’s plan to reduce the mobile termination rate (MTR) by 57 percent to INR0.06 per minute with effect from October 2017 and to remove it completely by January 2020.

The move should bring significant cost-savings and lead to faster-than-expected EBITDA break-even for recent entrant Reliance Jio, a subsidiary of Reliance Industries.

Fitch Ratings said the MTR cut will reduce the EBITDA of Bharti Airtel, Idea Cellular and Vodafone India by 3 percent – 6 percent in the financial year ending March 2018 (FY18). This will place further pressure on them, which are already facing unprecedented competition from Jio.

Industry average revenue per user declined by 20 percent-22 percent yoy in Q1 FY 2018, reflecting Jio’s offer of free voice, text and data services for six months from September 2016 and its subsequent discounts and promotions to win subscribers.

Most incumbents have lost subscriber market share to Jio during the last two quarters, with Bharti the exception.

The removal of the MTR in 2020 will have a much smaller impact. Reliance Jio’s net payment of interconnections fees to incumbents will fall as its subscriber base grows, and asymmetry will be minimal by 2020.

Jio already had 98 million active subscribers at end-July 2017 with a 9.6 percent share. Moreover, overall voice revenue will continue to drop as a result of Jio free voice call offerings and the rising popularity of data-led ‘over the top’ (OTT) operators.

Bharti Airtel’s revenue and EBITDA will decline by at least 5 percent in FY 2018 amid intense competition and lower MTRs.

Mobile blended average revenue per user is likely to fall to around INR150 or $2.2 by March 2018, down 5 percent from March 2017.

Jio, which has a revenue market share of around 4 percent-5 percent, will increase its revenue share to more than 10 percent by 2018.

Faisal Kawoosa, principal analyst — Telecommunications & ESDM at CyberMedia Research said the reduction in IUC will be hitting the Capex related investments and ROI on the existing infrastructure investments of mobile operators.