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Vodafone Idea, Airtel Shares Jump After Jio Revises Call Prices

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Telecom shares gained on Thursday after Reliance Jio announced that it will charge its customers on voice calls made to other networks in an effect to curb its IUC expenses amid regulatory uncertainty.

The decision is a reversal of the operator's earlier promise in 2016 to keep all voice calls free.

Vodafone Idea, Airtel Shares Jump After Jio Revises Call Prices
Bharti Airtel: Quotes, News
BSE 382.70BSE Quote2.5 (-0.65%)
NSE 382.10NSE Quote3.15 (-0.82%)
Reliance Industries: Quotes, News
BSE 1376.50BSE Quote3.8 (0.28%)
NSE 1377.35NSE Quote5 (0.36%)
 

IUC or Interconnect Usage Charge is the cost paid by one mobile telecom operator to another when its customers make outgoing mobile calls to the other operator's customers. These charges are fixed by Telecom Regulatory Authority of India (TRAI) and are currently at 6 paise per minute.

Telecom Stocks Rise

Shares of Bharati Airtel jumped as much as 7.1 percent to Rs 385 while Vodafone Idea gained 17.9 percent to Rs 6.9 on Thursday. Share of Reliance Industries Limited, the parent company of Reliance Jio Infocomm Limited was also up by close to 3 percent to touch an intraday high of Rs 1,366.

Uncertainty on IUC from regulators

In a regulatory filing, RIL explained that TRAI had been affirming its stance to bring IUC charges to zero. "In 2011, TRAI stated its opinion that termination charge should be made zero by 2014. It should be noted that at that time, neither 4G nor Jio existed," it said.

IUC for mobile calls were reduced from 14 paise per minute to 6 paise per minute from 1 October 2017 IUC for mobile calls was decided to be zero from 1 January 2020 however, its worked as a disincentive to the deployment of new technologies such as VoLTE and migration to IP networks by operators.

"Relying on the repeated stance of TRAI and the amendment already made to the regulations reducing the IUC to Zero, Jio continued to pay IUC from its own resources to Airtel and Vodafone-Idea etc. while offering free voice to its customers. So far, in the last three years Jio has paid nearly Rs.13,500 crore as NET IUC charges to the other operators," RIL said.

 

Considering that close to 70 percent of Indian telecom users are still not on 4G, RIL said that "exorbitant tariffs" were charged to 35 to 40 crore 2G customers. "In fact increased the tariffs for voice calls to around Rs. 1.50/ minute. They also charge a minimum of Rs 500 / GB for data from their 2G customers," it added.

"The price differential of free voice on Jio network and exorbitantly high tariffs on 2G networks causes the 35 - 40 crore 2G customers of Airtel and Vodafone-Idea to give missed calls to Jio customers. Jio network receives 25 to 30 crore missed calls on a daily basis," it said in the statement.

"In this background the consultation paper has created Regulatory uncertainty and therefore Jio has been compelled, most reluctantly and unavoidably, to recover this regulatory charge of 6 paise per minute for all off-net mobile voice calls so long as IUC charges exist," it added.

Compensation

To compensate for the IUC charges, Jio will provide additional data entitlement of equivalent value based on IUC top-up voucher consumption. "This will ensure no increase in tariff for customers," it said.

Read more about: vodafone idea airtel jio
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