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Reliance Industries stock rises after Trai cuts interconnection usage charge; Bharti Airtel, Vodafone oppose move

The Reliance Industries stock rose as much as 4 percent or 32 points in early trade to hit a 52-week high of 872 level on the BSE.

BT Online | September 20, 2017 | Updated 13:08 IST
Reliance Industries stock rises after Trai cuts interconnection usage charge; Airtel, Vodafone oppose move

The Reliance Industries stock on Wednesday rose higher in early trade after regulator Telecom Regulatory Authority of India (Trai) announced slashing of the interconnection usage charge (IUC), the charge paid by telcos for mobile calls made by their customers to networks of other companies to 6 paise a minute, from 14 paise at present.

The biggest beneficiary of the order will be Mukesh Ambani-owned Reliance Jio, a subsidiary of Mumbai-based Reliance Industries. Reliance Jio is offering free voice calls on its network.

Established operators such as Bharti Airtel, Vodafone and Idea Cellular wanted the IUC rate to be raised and benchmarked against the actual cost but Trai went ahead with the reduction of the interconnect usage charge.

Established telecom operators have argued that every call on the network has a cost, and expenses of an incoming call on their network should be borne by the operator from whose network, the call has originated.

New entrant Reliance Jio said cost of delivering calls on new technologies is almost negligible and incumbents continue to gain from IUC even after having recovered cost of their entire network.

The new interconnection usage charge (IUC) rate of 6 paise per minute will be applicable from October 1, 2017, and will be completely eliminated from January 1, 2020.

Incumbents Bharti Airtel and Vodafone slammed Trai's decision to reduce call connect charges, saying that the move will benefit only one operator and worsen the financial health of stressed industry. Vodafone, the country's second- largest operator in terms of number of subscribers, termed the Trai's decision as "retrograde regulatory measure".

The incumbent operator in a statement alleged the move will significantly benefit new entrant alone and would adversely affect the rest of the industry.

Airtel said, "The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favour."

Expressing disappointment at the new regulations, Airtel said the industry is facing severe financial stress and the cut in the interconnection usage charges (IUC) will "further worsen" the situation.

"As part of an industry, which continues to be a critical driving force behind the economic growth in the country, we are genuinely dismayed by this decision," said Airtel, India's largest telecom operator.

On Tuesday night, Vodafone had expressed dismay at TRAI's latest decision and had claimed that the "retrograde" measure, unless mitigated, will have serious consequences for investment in rural coverage and government's vision of Digital India.

Cellular industry association COAI has termed the move "disastrous", and warned that most of its members will take legal recourse on the issue, to protect their financial interests.

Mobile tariffs will fall if the operators pass on the benefit of reduced IUC charge to customers.

However, it still remains to be seen whether this will eventually translate in to lower phone bills for consumers as incumbent telecom players claim their financial stress will increase.

The Reliance Industries stock rose as much as 4 percent or 32 points in early trade to hit a 52-week high of 872 level on the BSE.

At 12:55 pm, the stock was trading 1.13 percent or 9.50 points higher at 849 level on the BSE.

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