Belying hopes of the incumbent telecom operators, the Telecom Regulatory Authority of India (TRAI) might eventually do away with interconnect usage charges (IUC) regime, even though it might be slashed by nearly half immediately. The reductions are expected to continue till the charges are brought to nil.

TRAI has completed the review process on IUC, and is ready to announce the new charges soon, sources close to the development said.

“The immediate reduction is likely to be about 6-7 paise per minute, and then by another one or two paise. The cuts will continue for another year or till IUC becomes nil. This is also in line with the Telecom Commission’s recommendations of a zero IUC regime,” another source said.

The present IUC charges stand at 14 paise a minute, while the Telecom Commission had recommended reducing it to about 7-8 paise. IUC, also known as termination charges, are currently levied on mobile to mobile, international to mobile and international to fixedline calls.

India has a calling-party paying regime for interconnect, under which the network which originates the call pays a termination charge to receiving network.

Brokerage firm CLSA in its September 5 report said that every past review resulted in a 30-33 per cent cut in termination charges.

“We believe a similar 30 per cent reduction is likely, taking the termination charge to 10 paise per minute,” it added.

Since 2004, TRAI has consistently lowered termination charges from 30 paise per minute in 2004 to 20 paise in 2009 and 14 paise in 2015.

“IUC impacts both revenues and access costs for mobile operators and a potential 50 per cent cut in IUC to 7 paise per minute will hit Bharti Airtel and Idea Cellular’s EBITDA by 4 per cent and 6 per cent, respectively. However, Reliance Jio will be a beneficiary of lower access costs,” it added.

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