Telecom giant Reliance Jio on Wednesday said it would initiate charging its Jio users 6 paise/minute for voice calls made to networks other than Jio like Airtel, Vodafone Idea after hints that call connect charges might not end on 31st December as proposed earlier. However, industry experts believe that the other operators might make use of the opportunity to increase their tariffs as well, hence equalizing the overall impact in the short period.
According to reports, the present Jio users, as well as the ones joining the network from Thursday, will need to top up with Rs 10-100 to pay for IUC or interconnect usage charge. They, however, will get an equivalent amount of free data, that is, 1 GB to 10 GB.
The tariff charges will effectively end Jio’s primary disruptive practice- free voice call. Moreover, it will also assist the telecom in saving Rs 650 crore in the upcoming quarter. Jio paid Rs 851 crore to Airtel, BSNL and Vodafone Idea last quarter as interconnect usage charge.
During its launch in 2015, Mukesh Ambani said that all voice calls for Jio consumers would be free & no Jio user will ever pay for voice calls again, bringing an end to the era of paying for voice calls.
This put intense pressure on its rival players who were charging Re 1/minute, and the majority of its revenues were coming from voice calls. Jio also stated the new expense for the consumer would be a temporary one till the telecom regulator TRAI decides to abolish the IUC regime.
With this move, the average revenue per user is expected to rise by around 15%. Kotak Institutional Equities’ analysts expect a rough increase of 6-8% in average revenue per user for the authorities if they adopt similar hike tariffs for consumers using combo data & voice call packs.
Predictably, the shares of Bharti Airtel and Vodafone Idea have risen 10% and 20% respectively in the past two trading sessions. Earlier, TRAI had recommended two years ago that the fee would be abolished with effect from January 2020.
A controversial question that remains is whether the friction caused by the additional charge will damage Jio’s subscriber addition number. While this might be true in the near term, the firm has given sufficient evidence that it would take corrective measures as soon as it is required.
Jio is eyeing a 50% market share, and given that it has grown to take up nearly 35% share already, the firm might shift its strategies to focus on the revenue.