India's telecoms regulator Trai has ordered operators to slash the interconnection usage charge (IUC) – the mobile termination rate - starting from October 1, in a move that threatens to further disrupt the market.
Starting next month, the IUC will be cut from 14 paise ($0.002) per minute to 6 paise per minute, Trai announced.
The regulator also reportedly plans to scrap the IUC altogether for all types of domestic calls from the start of 2020.
The cut is seen as a setback for incumbent operators including Bharti Airtel, Vodafone India and Idea Cellular but another potential advantage for disruptive newcomer Reliance Jio Infocomm.
Fitch Ratings has estimated that the move will result in a transfer of around $500 million to $600 million per year from incumbents to Jio.
The major incumbents Bharti Airtel, Idea Cellular and Vodafone India also stand to have their ebitda reduced by 3% to 6% for the current financial year ending in March.
“This will place further pressure on these companies, which are already facing unprecedented competition from Jio,” the credit rating company said in a research note.
“Industry ARPU declined by 20%-22% year on year in the first quarter of FY18, reflecting Jio's offer of free voice, text and data services for six months from September 2016 and its subsequent discounts and promotions to win subscribers. Most incumbents have lost subscriber market share to Jio during the last two quarters, with Bharti the exception.”
Trai said it has taken the decision based on feedback from operators and other stakeholders. But major operators had been warning that the move could have an adverse impact on competition and unfairly benefit Reliance Jio, which is offering voice calls for free but paying IUCs to the incumbents.