Jio's move to make off-net local calls free to have negligible Ebitda impact: Analysts Reliance Jio’s decision to stop charging customers for calls to rival networks from January 1 will have a negligible impact on its Ebitda or `operating income’ as the market leader already offers a higher dose of free minutes for such calls compared to actual usage volumes, analysts said. Kalyan ParbatETTelecomJanuary 04, 2021, 16:02 IST

 Kolkata: Reliance Jio’s decision to stop charging customers for calls to rival networks from January 1 will have a negligible impact on its Ebitda or `operating income’ as the market leader already offers a higher dose of free minutes for such calls compared to actual usage volumes, analysts said.

Motilal Oswal said Jio’s move will have “insignificant Ebitda impact” as the telecom market leader’s price plans provide 1,000 minutes of free off-net outgoing calls versus around 400 minutes of average off-net calls/subscriber. Thus, it said, the “incremental revenue from off-net outgoing calls would be restricted, indicating limited revenue impact”.

Last week, Jio said it would stop levying interconnect usage charges (IUC) for all domestic voice calls with the scrapping of such fees from January 1, in line with the telecom regulator’s directions.

The Mukesh Ambani-led telco, with over 406 million users compared with over 294 million for Bharti Airtel and under 272 million for Vodafone Idea (Vi), was a net revenue gainer from IUC, which was 6 paise a minute. The fee is paid by the call-originating telco to the destination carrier.

Motilal Oswal, however, estimates that when Jio initially started charging IUC for outgoing calls to rival networks, it was paying an estimated Rs 1,430 crore as interconnect charges or 11% of (quarterly) revenue”, but in the last five quarters, it had turned a net IUC recipient -- albeit by an insignificant amount -- as most calls were terminating on its 4G network, courtesy its steady customer market share gains.

Credit Suisse, though, said the elimination of IUC should trigger some operating income gains for Vi, which was a net payer on this score. The impact of the scrapping of IUC charges “would be neutral for Airtel” as the “mix of on-net and off-net calls is roughly balanced” in the Sunil Mittal-led telco’s case.

Scrapping of IUC from January 1 ended the calling party pays (CPP) regime that was introduced back in 2003. Soon after starting services in September 2016, Jio, then a net IUC payer, had pushed the Telecom Regulatory Authority of India (Trai) for a zero-IUC regime, which was then opposed by Airtel and Vi, who were then net IUC recipients. Trai first ruled moving to zero IUC from January 1, 2020, but deferred its implementation by a year.