State-owned BSNL would be the biggest gainer followed by MTNL if the government changes the inter-connect usage charges, based on TRAI's consultation paper, according to a recent report by equity research firm J M Morgan Stanley.

If the government were to change the IUC based on the consultation paper, Bharat Sanchar Nigam Ltd would be the biggest gainer, followed by Mahanagar Telecom Nigam Ltd.

The loss due to the partial rollback of reduction in free calls would be offset via the ADC (access deficit charge), the report stated.

The wireless -- WLL and cellular -- subscriber could end up paying higher long distance charges, perhaps at par with the wireline subscriber, it said.

Calling for eliminating anomalies like different pulse rate durations for fixed-to-GSM and fixed-to-WLL call and different termination charges for long distance calls into WLL-GSM network, the report said: "The incremental consumer is getting confused and avoiding subscribing to a telecom service until he understands the cost of calling."

"This could lead to a slowdown in the country's net additions," it said.

The Telecom Regulatory Authority of India is in the process of coming out with a revised IUC order.

The consultation paper by TRAI on the IUC regime largely discusses the issue of ADC and who should receive it and the paper tends to make case for the wireline access provider to be the sole recipient of ADC making their business more viable.

The report stated that the introduction of calling party pays (CPP) from May 1, 2003 should provide a fillip to Bharti's and other cellular players' subscriber base growth.

Regarding IUC, a level playing field vis-a-vis the WLL-CDMA operators negates the regulatory advantages the latter had over the GSM players, it said.

However, this has come at the price of making all incoming calls free for GSM subscribers implying lower ARPUs (average return per user).

However, the impact of the new interconnect regime is not very positive on WLL-CDMA operators, it said adding these players would receive incoming interconnect charges which they did not receive earlier.

On the wireline, the impact is positive but capped, the report stated.

"The wireline operator is the largest beneficiary of the tariff rebalancing exercise and IUC regime. Although the expected hike in the monthly bill for wireline users would have been 15-20 per cent, a partial rollback in the reduction of free calls would cap the rise. The overall benefit to the wireline player would be a 7-10 per cent rise in profits at the operating level.