Reliance Jio Says VoLTE Is the Reason for Its Lower Network Costs, Not Accounting Practices

When the issue of Interconnect Usage Charges (IUC) came up, the Sunil Bharti Mittal led telecom operator, Bharti Airtel alleged that the network cost incurred by Reliance Jio is lower because of its different accounting practices. Now in a new update, as reported by ET Telecom, Reliance Jio has rejected the allegation saying that the network costs are lower for the telco because of the technology that it uses and not because of the accounting practices. The telecom operator also added that the cost differential is because of the network technology which the Mukesh Ambani led telco has deployed, and it also added that the two issues remain separate and have no forbearing to each other.

Reliance Jio Accounting Practices in Crosshair

A senior Reliance Jio executive remarked on this issue, “Accounting standards have nothing to do with the cost of carrying a voice call…Jio follows Indian accounting standards. It’s a blatant lie to say it does its accounting in any different way.” In its statements, Bharti Airtel had alleged that Reliance Jio follows totally different accounting practices which are off the standards followed by the telecom operators worldwide. While the other telcos follow a uniform accounting standard, Reliance Jio follows a totally different accounting method altogether. The Airtel executive begged to differ as he said that the other telcos use a simple, straightforward and well-established method of accounting to calculate what cost is capitalised in the balance sheet and what goes towards P&L.

Reliance Jio Says VoLTE Technology is the Reason for Lower Costs

Reliance Jio had different views on the matter, as per Reliance Jio it has been “demonstrated to all authorities that cost of carrying a voice call on an IP network is close to nil at 0.05 paise a minute,” for the telecom operator. Reliance Jio also said that this is because of the 4G VoLTE technology which it has deployed across the country. The telco also added that the other telecom operators have not upgraded their IP technology and are charging their 2G and 3G customers up to Rs 1.5 per minute for voice calls which is what cost them more as compared to Reliance Jio. When posed with questions, Airtel executive declined to comment.

Imbalance in Network Traffic: Reliance Jio vs Others

The data brings it to the surface that Bharti Airtel has 18% of its voice calls over LTE while Vodafone has 5% calls over LTE. This essentially means that the telcos have lower IP technology deployment wherein not all calls are being routed over the internet. Whereas, on the other hand, Reliance Jio has 100% of its calls over VoLTE. The data collected by Trai has cited this as one of the major reasons for the network imbalances. This is what has triggered the Telecom Regulatory Authority of India to float a new consultation paper to discuss the deferring of IUC (Interconnect Usage Charges) to zero which will likely come into effect starting January 20.

The Row Over IUC Payments

It is worth noting that IUC is paid by the telecom operator from where the call originates to the other telecom operator which carries the call. The calculation for IUC is done at the end of the month to settle the accounts. It is obvious to understand currently the network flow is such that most calls are made from Reliance Jio to other operators, meaning that Bharti Airtel and Vodafone Idea become the gainers in the case of IUC charges. However, if the IUC charges were to fall down to zero, then Reliance Jio would be able to make saving north of Rs 3,000 crore annually which it currently pays out in IUC to other telcos.

The Issue With Lowering of Call Ringing Time

Also, other telcos like Bharti Airtel and Vodafone Idea have alleged that the Mukesh Ambani led telco is gaming the IUC regime by reducing the ringing time of its calls. According to these telcos, if the call recipient has less time to pick up the call, then they are likely to call back from their Vodafone, Idea or Airtel number back to the Reliance Jio number thus reducing the network imbalance and further lowering the IUC payout for Reliance Jio. Trai data has noted that in six months the traffic imbalance in absolute minutes between Jio and the incumbents has gone down from 60 billion minutes in December 2017 to 40 billion minutes in June.