Interconnect and roaming: gross or net

Every call between networks and every customer travelling abroad creates charges between operators. Whether those charges are revenue, cost or net amounts affects reported revenue materially, even though profit is the same. This guide explains each traffic flow, the principal or agent question, and the estimation and settlement issues interconnect teams deal with.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. 3 minute read.

Short answer

Interconnect and roaming revenue arises when operators carry each other's traffic. Under IFRS 15, an operator that terminates calls from other networks, or serves visiting roamers, earns wholesale revenue from the other operator, presented gross. When its own customers call other networks or roam abroad, it charges them retail revenue and pays the other operator a cost, also gross, because it is the principal in its customers' service. Transit traffic it merely passes on may be agency, reported net. Settlement balances are offset only when IAS 32's netting conditions are met.

At a glance

Incoming termination
Wholesale revenue, gross
Outgoing calls
Retail revenue and interconnect cost, gross
Inbound roaming
Wholesale revenue, gross
Outbound roaming
Retail revenue and roaming cost, gross
Pure transit
May be net, as agent
Balances
Offset only if IAS 32 met
Interconnect and roaming: gross or netIncoming termination: Wholesale revenue, gross; Outgoing calls: Retail revenue and interconnect cost, gross; Inbound roaming: Wholesale revenue, gross; Outbound roaming: Retail revenue and roaming cost, gross; Pure transit: May be net, as agent; Balances: Offset only if IAS 32 met.KEY FACTS AT A GLANCEInterconnect and roaming: gross or netIncoming terminationWholesale revenue, grossOutgoing callsRetail revenue andinterconnect cost, grossInbound roamingWholesale revenue, grossOutbound roamingRetail revenue androaming cost, grossPure transitMay be net, as agentBalancesOffset only if IAS 32 metTax BakersInterconnect and roaming: gross or netIncoming termination: Wholesale revenue, gross; Outgoing calls: Retail revenue and interconnect cost, gross; Inbound roaming: Wholesale revenue, gross; Outbound roaming: Retail revenue and roaming cost, gross; Pure transit: May be net, as agent; Balances: Offset only if IAS 32 met.KEY FACTS AT A GLANCEInterconnect and roaming: gross ornetIncoming terminationWholesale revenue, grossOutgoing callsRetail revenue and interconnect cost, grossInbound roamingWholesale revenue, grossOutbound roamingRetail revenue and roaming cost, grossPure transitMay be net, as agentBalancesOffset only if IAS 32 metTax Bakers
Key facts at a glance, as set out in this guide.

How are interconnect and roaming flows presented?

Interconnect and roaming flowsInterconnect and roaming flowsCustomerPresentationIncomingterminationOther operatorRevenue, grossOutgoing callsto other networksOwn subscriberRetail revenue;cost, grossInbound roamingVisitingoperatorRevenue, grossOutbound roamingOwn subscriberRetail revenue;cost, grossPure transitOther operatorsOften net
The customer and the promised service decide gross or net.

The question in each case is who the operator's customer is and whether it controls the service before it is transferred. For calls its own customers make and for roaming abroad, the operator promises the service and sets the price, so it is principal even though another network carries part of the traffic: revenue is the full retail charge and the other network's charge is a cost. For traffic it terminates or carries for another operator, its customer is that operator, and its own service is revenue.

An example of roaming flows

Flow in the yearAmountPresentation
Visitors using our network, charged to their home operators40Revenue: inbound roaming
Our customers using networks abroad, charged to them60Revenue: outbound roaming, retail
Charges from visited networks for our customers' use45Cost of sales
Net settlement owed by us to a roaming clearing house5Payable, or offset if conditions met

Revenue is 100, not the 55 net margin, and the 45 is a cost. Netting the flows would understate both revenue and costs.

When is an operator an agent?

When it carries traffic between two other operators without adding a service of its own, and does not control the capacity before passing it on, for example some international wholesale transit or hubbing arrangements, the operator may be an agent, reporting only its margin. Value-added services billed through the operator but provided by third parties, such as premium-rate content, are often agency arrangements too.

Why are estimates needed?

Roaming and interconnect usage is exchanged through records and invoices that arrive after the month ends, and rates may be disputed. Operators accrue revenue and costs for traffic not yet invoiced, from network records, and recognise revenue on disputed amounts only to the extent a significant reversal is highly probable not to occur. Old disputes are a common source of audit adjustments.

An example of an interconnect accrual

At month end, the operator's network records show 50 million minutes of traffic terminated from another network at a regulated rate of 0.01, but the other operator's invoice will not be agreed until the following month. The operator accrues revenue of 500,000 on its own traffic records, adjusting when the invoice is reconciled. Persistent differences between the two operators' records lead to disputes, which are settled periodically.

Can interconnect receivables and payables be offset?

In the balance sheet, only if the operator has a legally enforceable right to set off the amounts and intends to settle net or simultaneously, under IAS 32. Many interconnect and roaming agreements, and clearing house arrangements, provide for net settlement, but each should be checked. Credit risk on carrier balances is assessed for ECL like other receivables.

How do regulated rates affect the accounting?

Termination rates are often regulated, and regulators sometimes change them retrospectively. A retrospective rate cut is variable consideration: revenue already recognised is reduced if a reversal becomes likely, and refunds owed are liabilities. See ECL on telecom receivables, principal vs agent and telecom accounting.

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Questions people ask

Is interconnect revenue presented gross or net?

Usually gross: termination of other networks' traffic is the operator's own service, and calls by its own customers to other networks are retail revenue with interconnect as a cost.

How is outbound roaming accounted for?

As retail revenue from the operator's own customers, with the visited network's charges as a cost, because the operator is principal.

When does an operator report interconnect net?

When it acts as an agent, such as for pure transit traffic between other operators without adding its own service.

Can interconnect receivables and payables be netted?

Only when there is a legally enforceable right of set-off and an intention to settle net, under IAS 32.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

TelecomTelecom revenue recognition for bundled plansTelecomECL on telecom receivablesTelecomTelecom accounting: the key IFRS issues

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