While the rest of the incumbent operators are anxious over the possibility of losing a large revenue stream in the eventuality of a lesser or zero Interconnect Usage Charge (IUC) from the current 14 paise a minute, public carrier BSNL today said it is ready for cashing in on the opportunity whatever decision regulator takes on the rates and can regain its Rs 300 crore annual IUC revenue through effective new income sources .
“We dont know which way the IUC rates would go.. but whenever these things change, they generate a new business environment.. and if you are able to cash on that environment.. you end up gaining on that”, CMD of Bharat Sanchar Nigam Ltd Anupam Shrivastava told Bureaucracy Today .
Detailing on the possible scenarios over the upcoming TRAI regulations on IUC which Airtel, Vodafone and Idea among others fear would lead to further dips in their incomes if it is lowered from the current 14 paise a minute, Shrivastava said “Suppose it (IUC) becomes zero, so it will create a situation when cost to other operators becomes zero. In that case we have to with nimbleness come up with those products.. or charges which will probably offer better services.”
BSNL’s IUC income is just Rs 300 crore a year on a net basis. So the loss of revenue the PSU is hopeful of replacing with some new channels of revenue by launching new Plans, products and tie-ups.
“Our IUC is coming around Rs 300 crores a year on net-net basis. Its not very big for us as lot of IUC is offset, ..we can come up with counter plans to regain this revenue and adjust it”, the CMD said.
A fall in interconnect usage charge (IUC) is likely to hit the operating profits of Bharti and Idea Cellular but new entrant Jio which has close to 12 crore subscriber in the last one year Reliance Jio could benefit from the move and break even faster, according to many research reports of the broking houses.
IUC is a charge paid by the operator of a network from where a call originates to the telco where it terminates. It is 14 paise a minute at present. The telecom regulator, Trai, is in the process of revising the charge in sync with network technologies improvements.
Bank of America-Merrill Lynch said in a recent note that Jio will be a major beneficiary of any material cut in IUC, as “its net interconnect payments could come down materially, helping it to achieve EBITDA (earnings before interest, tax, depreciation & amortisation) break-even earlier than expected”.
Reliance Jio, the all IP based 4G service provider has been pressing for the 14 paise/minute IUC charge to be dropped, since it pays a sizeable sum as interconnect charges because the bulk of its call traffic terminates in the networks of incumbent telcos. In case , if IUC is increased from 14 paise, Jio would end up paying more to the top three telcos.
Bharti Airtel, Vodafone India and Idea Cellular, however, are pushing for an immediate increase in the IUC to 30-35 paise/minute, contending that the current rate is inadequate for covering costs of the network maintenance. They stand to lose the most in revenue as they have the maximum number of subscribers if IUC is scrapped, as they have the most number of subscribers and garner a major share of the termination charges as most calls end up on their networks.