Reliance Jio New IUC Charges Could Help Increase the Industry ARPU

With Reliance Jio’s decision of charging 6 paise per minute on outgoing voice calls to other networks, India Ratings and Research (Fitch Group) has come up with a new report about how this move is going to impact the company financials. As per the new analysis conducted after this decision, India Rating and Research has said that Reliance Jio is going to witness a rise in its Average Revenue Per User (ARPU) by Rs 9 and in addition to this, the EBITDA of the company is also going to increase by 15%-18% in the FY20. This is given the fact that the average calling pattern remains the same and the shift to the zero interconnect usage charge (IUC) regime is postponed from its current set date of January 1, 2020. However, there is also the question that this rollout of the new charge pegged at 6 paise per minute might discourage users from making calls from the Reliance Jio network and hence it could limit the EBITDA of the company at 8% to 10%.

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New IUC Charges Also to Decrease Outgoing Calls from Reliance Jio

Ind-Ra has noted that for the rival telecom operators, Bharti Airtel and Reliance Jio, these telcos might see reduced incoming call traffic which means that they might see a decline in their income from the IUC payouts which was 3% of the total revenue for Bharti Airtel and 10% of the total revenue for Vodafone Idea. Also, with the removal of the pricing arbitrage, Vodafone Idea and Bharti Airtel might continue to lose subscribers to Reliance Jio. There is also the fact, that for a short term, the tariff hike by Reliance Jio could help the rival telcos in repairing their balance sheets and could get them a marginal recovery of around 10%. However, as per the Ind-Ra report, this improvement might not be sufficient for addressing the high debt levels of both the companies.