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Telecom business of India's Reliance does U-turn on call charges

Stock Markets Oct 09, 2019 10:51AM ET
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By Promit Mukherjee

MUMBAI (Reuters) - India's Reliance Industries Ltd's (NS:RELI) telecom arm Jio said on Wednesday it will charge its customers for voice calls made through its network to other operators as it racks up fees to rivals.

The move goes back on a promise Jio made in 2016 to keep all voice calls free. Operators such as Jio have to pay fees when calls are made from one network to another, to cover the use of a rival's network. Jio's rivals are Bharti Airtel Ltd (NS:BRTI) and Vodafone (LON:VOD) Idea Ltd (NS:VODA).

India's telecom regulator TRAI said in 2016 that it planned to reduce the so-called Interconnect Usage Charge (IUC) to zero from 6 paise (0.13 cents) per minute by January 2020 as it had envisaged that by then most of India's voice traffic would have moved to 4G, therefore substantially bringing down the cost.

However, as 70% of India's telecom subscribers are still not on 4G, TRAI is considering continuing the IUC charges, thwarting Reliance's plans to continue giving customers free voice calls.

"So far, in the last three years Jio has paid nearly Rs.13,500 crore (135 billion rupees) as net IUC charges to the other operators," Jio said in the statement.

Reliance, led by billionaire Mukesh Ambani, invested some $40 billion to launch Jio three years ago. It was India's first company to offer free voice calls, chiefly because it was the only company which was offering voice over 4G data.

Ambani's foray into the telecoms sector shook the industry, leading rivals to cut prices, shut up shop or merge.

Jio has gained 340 million customers by offering cut-throat data prices but has had to pay a high fee to its rivals because they have more customers.

"For all recharges done by Jio customers starting today, calls made to other mobile operators will be charged at the prevailing IUC rate of 6 paise (0.13 cents) per minute," Jio said in a statement on Wednesday.

Ambani had said at the company's 2016 annual general meeting (AGM) that he intended to keep all voice calls free.

At the latest AGM in August Asia's richest man said he intended to make Reliance net debt free by 2021.

Analysts estimate that for the full year ending in March 2020 Jio would have to pay up to 20 billion rupees in IUC charges, denting its operating income.

Telecom business of India's Reliance does U-turn on call charges
 

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