Airtel, Idea move High Court seeking stay on Trai decision to reduce IUC

MUMBAI | NEW DELHI: Bharti Airtel and Idea Cellular have moved the Bombay High Court, seeking a stay on the telecom regulator’s decision to cut the interconnection usage charge ( IUC) from next month, marking the start of another legal confrontation between telcos and the sector watchdog.

Idea, the No. 3 operator, confirmed the development over a call to ET. Airtel also moved the same court, people familiar with the matter said. Airtel didn’t respond to an email seeking comment.

The two telcos on Thursday asked the court to halt the implementation of the Telecom Regulatory Authority of India’s decision to reduce IUC to 6 paise a minute from 14 paise from October 1 and to scrap the charge from January 2020. IUC is paid to networks that receive calls.

The legal battle is the second instance of telecom operators contesting a Trai decision. The previous case was related to the regulator’s order to telcos to compensate users for call drops, which the Supreme Court scrapped.

The stakes are higher this time as companies including Airtel, Vodafone and Idea Cellular stand to lose a combined Rs 5,000 crore in revenue annually, while Reliance Jio Infocomm, which started services a year ago, could gain about Rs 5,000 crore.

India’s top telcos are already locked in a price war with Jio that has hit their revenue and profit. They have also challenged Trai’s March 2015 decision to reduce the IUC to 14 paise a minute from 20 paise. The case is still pending.

Trai notified the latest reduction on September 19, prompting accusations of lack of transparency and bias by Airtel, Vodafone India and Idea Cellular, which want IUC to be doubled.

Trai Chairman RS Sharma defended the decision, saying it was in the interests of consumers and the industry. Jio rejected the contention of its rivals that it was being favoured by the regulator and slammed them for criticising Trai.

The regulator took pre-emptive action last week and filed caveats in 18 high courts across the country asking to be heard before any order is issued.

Airtel, Vodafone and Idea have been net gainers under the current IUC system since they have more than 60% of the subscribers and more calls terminating on their networks than originating from them. Jio, which offers free voice services, has the most outgoing calls terminating on the networks of others.

75.55 at the close on the BSE on Thursday, while Airtel declined 0.8% to Rs 382.40.

Idea, owned by Kumar Mangalam Birla, is expected to be the worst hit by the IUC reduction. The charge accounted for 9% to 15% of consolidated revenue for Bharti and Idea, according to CLSA analysts Deepti Chaturvedi and Akshat Agarwal.

Idea’s cash flow will fall by Rs 1,608.9 crore ($250 million) in FY18, Goldman Sachs estimated. Credit Suisse reduced its operating profit estimate for Idea by about 3%.

Goldman Sachs estimates that Bharti Airtel’s annual cash flow will take a dent of about Rs 965 crore, although it’s free cash flow will remain positive in FY18/19.