Reliance Industries stock rises as IUC cut boosts Reliance Jio's arsenal in telecom battle with Bharti Airtel, Idea and Vodafone

Market heavyweight Reliance Industries' stock on Wednesday received a big boost from a Trai directive which called for cutting of interconnection usage (IUC) charge with the market capitalisation rising by Rs 4,617 crore to Rs 5,50,990.42 crore on the BSE.

Bharti Airtel and Idea Cellular which stand to lose from the Trai directive closed 0.39 percent higher and 3.43 percent lower, respectively on the BSE.

On the other hand, Reliance Industries, the holding company of Reliance Jio and latest entrant into the Indian telecom sector, closed 0.85 percent higher at 847 level on the BSE.

In early trade, the stock hit a 52-week high of 872.10 level and its market capitalisation rose by 20,789 crore during intraday trade. Later, the stock lost its momentum during the day.

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 57 percent cut in the termination charge is estimated to lower Jio's IUC spend by around Rs 4,000 crore on an annualised basis.

"At a per-consumer level, on a 100 mn sub base, a saving of US$550-600 mn translates into roughly Rs30-33/sub/month. Whether Jio retains the benefit or chooses to pass on some or all of it to the consumer is tough to say. However, that this move by TRAI opens up the possibility of Jio becoming more aggressive is a clear negative for incumbents in our view," Kotak Equities said in its note.

Meanwhile, the three incumbents, Bharti Airtel, Vodafone and Idea Cellular are likely to face a combined revenue loss of Rs 4,700 crore, according to estimates.

Morgan Stanley estimated the fee cut could lead to an about 40 percent plunge in Bharti Airtel's annual profit, adding that Reliance Jio Infocomm would be the key beneficiary of the move.