Since the disruptive entry of Reliance Jio in September last year, India’s leading telecom incumbents – Bharti Airtel, Idea and Vodafone – have been hemorrhaging subscribers, revenue, and profits. But even in their darkest days of misery, they had one silver lining—every time a Jio subscriber called one of their own, their cash registers rang up 14 paise ($.002). This was the “interconnect usage charge” (IUC) that any wireless operator in India has to pay its peer for “terminating” a call on the latter’s network.

On first glance the amount looks too small to matter. Till you realize the incumbents have over 650 million subscribers between them. And that, thanks to the asymmetry of a new player ramping up, they ended up receiving roughly 9 calls from Jio’s network for every call out from their own to Jio. The paise add up quickly.

Bharti Airtel alone, for instance, is estimated to have earned Rs 500 crore ($92 million) from Jio’s incoming calls in the most recent quarter. The contribution of IUC to Bharti Airtel and Idea’s wireless income was estimated by Mint to be 14% and 18% respectively.

This month, that silver lining is about to start disappearing. India’s telecom regulator TRAI is expected to announce a drastic cut in IUC this month. Estimates of the cut range from 50% to 100%.

The impact of that on Bharti Airtel and Idea’s pre-tax profits range from 4-6% and 9-15%.

Tempting as it may be to blame Reliance and its legendary ability to swing regulatory decisions in its favour, in this case, the incumbents are as much to blame. Through a mix of arrogance, overconfidence, and lack of strategic foresight, they’ve painted themselves into the same corner as state-owned telco BSNL did in the early 2000’s. Today’s incumbents were then the challengers.

The clock’s come full circle.

Obstruct and choke

“In 2003 Reliance painted the same incumbents as monopolists safeguarding their higher prices, turning customer and regulatory sentiment against them. It’s literally the same movie playing again,” says Kunal Bajaj, CEO, ETIPL, a telecom services startup and former telecom analyst.

He’s referring to Reliance’s original disruptive telecom play, Reliance Communications. Like Jio today, RCom used an advanced technology as a differentiator to enter a crowded race late. For Jio’s 4G LTE, RCom had 3G CDMA.

Like LTE today, CDMA was advanced for 2003 because it was optimized for data traffic too. The incumbents, led by Bharti Airtel, instead of co-opting CDMA for their own future, banded together under the GSM (the network technology powering most conventional networks then) umbrella and attacked CDMA.

Over the years, due to a mix of adverse customer selection, an intra-family split within the Ambani family and successful lobbying in favour of GSM by the incumbent operators, CDMA never really took off in India. Even though it was demonstrably a better technology.

AUTHOR

Rohin Dharmakumar

Rohin is co-founder and CEO at The Ken. He holds an MBA from the Indian Institute of Management, Calcutta and an engineering degree in Computer Sciences from the R.V.C.E., Bangalore.

View Full Profile

Subscribe to read this story

The Ken is the only business subscription you need. Questions?

 

Premium

  • 5 original and reported longform business stories every week
  • Access to ONLY India edition
  • Close to 250 exclusive stories every year
  • Full access to over 5 years of paywalled stories
  • Pick up to 5 premium subscriber newsletters
  • 4 original and reported longform business stories each week
  • Access to ONLY Southeast Asia edition
  • Close to 200 exclusive stories every year
  • Full access to all paywalled stories since March 2020
  • Pick up to 5 premium subscriber newsletters

Rs. 2,750 /year

$ 120 /year

India Edition
Subscribe Subscribe
Most Asked For

Borderless

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 5 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories

Rs. 4,200 /year

Subscribe
 

Echelon

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 5 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories
  • Bonus annual gift subscription
  • Priority access to all new products and features

Rs. 8,474 /year

Subscribe
Or

Questions?

What kind of subscription plans do you offer?

We have three types of subscriptions
- Premium which gives you access to either the India or the Southeast Asia edition.
- Borderless which gives you complete access to The Ken across both editions
- Echelon which gives you complete access to The Ken across both editions along with a bonus gift subscription

What do I get if I subscribe?

The Premium edition gives you access to stories in that edition along with any five subscriber-only newsletters of your choice.

The Borderless and Echelon subscription gives you complete access to The Ken across editions and unlimited access to as many newsletters as you like.

What topics do you usually write about?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics. We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

Our specialised subscriber-only newsletters are written by our expert, award-winning journalists and cover a range of topics across finance, retail, clean energy, cryptocurrency, ed-tech and many more.

How many newsletters do you have?

We are constantly adding specialised subscriber-only newsletters all the time. All of these are written by our team of award-winning journalists on a specialised topic.

You can see the list of newsletters that we publish over here.

Does a Premium subscription to your Indian edition get me access to the Southeast Asia edition? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

We recommend the Borderless or the Echelon Plan which will give you access to stories across both editions.

Do you have a mobile app?

Yes! We have a top-rated mobile app on both iOS and Android which allows you to read on-the-go and has some amazing features like the ability to bookmark stories, save on your device, dark mode, and much more. It’s really the best way to read The Ken.

Is there a free trial?

You can sign up for a free account to experience The Ken and understand our products better. We’ll send you some free stories and newsletters occasionally, and you can access our archive of previously published free stories. You can stay on the free account as long as you’d like.

The vast majority of our stories, articles and newsletters can be accessed only by a paid subscription.

Do you offer any discounts?

Sorry, no. Our journalism is funded completely by our subscribers. We believe that quality journalism comes at a price, and readers trust and pay us so that we can remain independent.

Do you offer refunds?

No. We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Just write to us at [email protected] with details. We’ll help you out.

I have a few more questions. How can I reach out to you?

Sure. Just email us at [email protected] or follow us on Twitter.