There has never been a dull moment in the telecom industry since Reliance Jio Infocomm Ltd launched commercial operations in 2016.

In the three years since its launch, it has been accused of predatory pricing – for charging ‘no tariffs’ and then ‘low tariffs’ to gain market share. Incumbents such as Bharti Airtel Ltd and Vodafone Idea Ltd are now miffed that Jio has suddenly decided to charge its subscribers ‘more tariffs’.

Jio said on Wednesday it will start charging its customers for outgoing calls made to rival networks at 6 paise a minute. This is to recover the interconnect usage charge (IUC) applicable on calls made to other networks, also known as off-net calls. Based on the quantum of such calls made from Jio’s network to Airtel, Vodafone Idea and the state-run mobile networks in the June quarter, analysts estimate a quarterly revenue bump of about ₹1800 crore for Jio.

Average revenue per user, or Arpu, is expected to rise by about 15%. Analysts at Kotak Institutional Equities expect a roughly 6-8% increase in Arpu for the incumbents if they adopt a similar hike in tariffs for customers who use bundled data and voice packs.

Not surprisingly, shares of Bharti Airtel and Vodafone Idea are up 10% and 20% respectively in the past two trading sessions. Why then are the incumbents complaining?

Airtel said in a statement, “This off-net charge... is to force IUC to be brought down." The incumbents are net receivers of the IUC charge, while Jio has a quarterly outgo of about Rs800 crore on this count. Indeed, even Reliance Jio’s statements clearly suggest that the increased tariff will be in force only till the time the IUC charge is retained by Telecom Regulatory Authority of India (Trai).

For perspective, Trai had suggested two years ago that the fee will be abolished with effect from January 2020. But last month, it asked telecom operators and other stakeholders to give feedback on whether it makes sense to postpone the abolition of IUC.

The unwritten subtext of Jio’s move is that costs for telecom consumers are increasing because Trai isn’t going ahead with its original plan of abolishing IUC. This will doubtlessly be highlighted in the telecom regulator’s consultation process. The suggestion that a ‘voice will always be free’ network is forced to charge for outgoing voice calls because of Trai’s move may well be an argument that gains popular support. It’s another matter that while Jio’s net IUC outgo is around Rs800 crore, it may end up getting a far higher amount as a result of the new charge. After all, while it is charging customers for off-net outgoing calls, it isn’t compensating them for off-net incoming calls, where it receives IUC from rivals.

Besides, the suggestion that voice has always been free on Jio’s network is also debatable. “We aren’t in sync with Jio’s views of having paid IUC “from its own resources while offering free voice to its customers". Of the bundled price paid by a customer, any attribution to voice, data, off-net outgoing IUC recovery etc. is an arbitrary one," say analysts at Kotak.

A moot question is if the friction caused by the additional charge will hurt Jio’s subscriber addition numbers. While this may well be true in the near-term, Jio has given ample evidence that it will take corrective action as soon as it is necessary.

“Jio could have taken a clean price hike, as expected, given it has become the market leader. The move to charge for IUC, with a sunset clause, indicates its sustained focus on subscriber additions and that tariff increase is not a near-term focus. Indeed, this move encourages voice-only subscribers to move to Jio's network," analysts at Jefferies India Pvt. Ltd said in a note to clients. Indeed, the additional charge for off-net calls will incentivise existing Jio users to bring friends and family on to the Jio network.

But rather than banking on such gains, Reliance Jio seems to be betting that its tariff move will put Trai on notice and that IUC would be abolished sooner than later. For a precariously placed company such as Vodafone Idea, net IUC receipts accounted for about 30% of Ebitda in Q1. An end of the IUC regime will hasten the depletion of its already low cash balances.

Rather than celebrate a possible temporary increase in tariffs, investors in Vodafone Idea and Airtel should worry about Jio’s aggressive approach with regards to not only subscriber additions but also regulatory debates such as IUC.

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