Top 3 telcos generated ₹1 L cr in revenues through IUC: Jio

Reliance Jio Infocomm Ltd told Telecom Regulatory Authority of India that the nation’s top three telcos have generated as much as ₹1.04 lakh crore in revenue in the past four years largely because of the nonimplementation of a 2011 recommendation by the regulator that inter-connection usage (IUC) rate be cut to zero from March 2015 from 20 paise then.

Jio said that between 2004 and 2017 Bharti Airtel Ltd and Idea Cellular Ltd together have generated ₹1.19 lakh crore in revenues through IUC.

Jio’s reference to the 2011 report on IUC by Trai originates from an affidavit filed by the sector regulator in Supreme Court where it reiterated its roadmap on IUC, which was to bring down the IUC to zero from March 2015. This roadmap was also a part of 2009 Trai regulation on IUC that excluded capital cost while calculating IUC. Protesting this move, telcos moved to TDSAT, which agreed to their demand. Trai, in turn, moved Supreme Court that upheld TDSAT’s decision that capital cost should be included in calculating IUC. Later after due consultations, IUC was brought down to 14 paise from 20 paise in 2015 and while doing so Trai had indicated that the termination charges would be reviewed after two years of being in force.

“Generally, a comprehensive regulatory review exercise in TRAI takes six to nine months’ time to complete and, hence, the present review exercise is being undertaken,” Trai said in its fresh consultation paper on the issue that came out in August.

Meanwhile, Cellular Operators Association of India, the industry lobby group that is accused by Reliance jio of favouring top three telcos, has written to Trai asking it to postpone the open house discussion to a date which is at least 4 weeks after the sharing of the cost models and assumptions of Trai used during the consultation process. Mint has reviewed a copy of the COAI letter.

In a presentation on Tuesday that Mint has seen, Jio said that benefits of incumbents have come at a cost to consumers and smaller operators and resulted in a “so-called” financial distress in the sector. Jio said that all the investments made prior to 2010 has been recovered by the industry and top three telcos have generated excessive return on account of IUC charged over the years.

“Incumbent operators have made significant excess recovery over actual cost of termination, which is the main reason for the so called financial stress in the sector,” it said.

“If we rewind the clock and assume implementation of BAK (Bill and Keep model) as recommended by Trai in 2011, the smaller operators would have given fair competition to incumbents and there would not be any stress in the system,” Jio said, adding that incumbents have recovered cost of assets deployed, there is no real logic for IUC to continue.

For every mobile phone call, the telecom firm that originates the call pays 14 paise to the one which receives the call, called interconnection user charges. On a net basis, established operators with more users and bigger networks tend to earn more from IUC, while newer and smaller ones find it a burden. Reliance Jio proposed zero IUC charges on Tuesday, while the other three presented their cost structures to press for a hike in IUC to at least 30 paise.