Fitch Ratings and CyberMedia Research said the latest recommendation from TRAI to bring down IUC from existing 14 paisa to 6 paisa will negative impact the telecom sector in India.
Both Vodafone and Bharti Airtel responded to the latest recommendation from TRAI saying the new IUC regime will only benefit Reliance Jio. On the other hand, Reliance Communications, a company promoted by Anil Ambani, said the cut in IUC charges is a welcome move.
Mobile operators won’t be able to pass on the benefit to the consumers and one should not expect the call charges to go further down.
Faisal Kawoosa, principal analyst — Telecommunications & ESDM at CyberMedia Research said the decision to scrap IUC in 2020 is a positive sign that should motivate operators further to align investments towards all IP next generation networks aligning with the global trends and also exhibits TRAI’s proactiveness in setting up a regulatory regime for future technologies.
The cut in IUC will be hitting the Capex related investments and ROI on the existing infrastructure investments of mobile operators. Indian mobile operators’ revenues are already under stress because of the disruptions in the market from techno-commercial perspectives.
CyberMedia Research said mobile operators in India generate 52 percent of their total revenues from voice business. The chart shows that there is still asymmetry in the patterns of incoming and outgoing traffic over the operator networks.
Airtel has shown the asymmetry in the traffic for the month of January 2017, with other operators. Though it hasn’t identified them; however, it can be understood that the first dataset refers to Jio where 93 percent is incoming and mere 7 percent is going out from Airtel to its network.
With the commercial plans already announced, one cannot expect this to normalize anytime soon and the incumbent operators can also not afford to make voice completely free. Though with VoLTE introduction they should be making voice free, but there is a barrier to VoLTE adoption from penetration point of view. VoLTE enabled mobile handsets cannot match the prices of 2G feature phones.
IUC reduction is going to impact operators like OTT applications; where the operator infrastructure is used to reach out to earn revenues without operators being able to leverage other than earning for the data services irrespective of the grade and level of the service.
IUC reduction will enable Reliance Jio, a company promoted by Mukesh Ambani, to enhance 4G subscriber base from the present 130 million by offering free voice and unjustifiable promotional plans without adequately compensating competition infrastructure being used.
The IUC cut will affect the revenue prospects of incumbent operators and it may even impact the call termination between Jio and other operators as the incumbents would find diminishing value in supporting the new entrant in the market and may not be willing to fully cooperate with respect to point of interconnects (POIs), etc.
