‘Rel Jio Offers Wiped Out 20% of Telecom Revenues’
India Ratings & Research revises FY18 outlook for the industry to negative, says redistribution of market share among existing telcos is underway
New Delhi: Indian telecom industry lost an estimated fifth of its revenue due to the disruptive free services offered by Mukesh Ambani-led Reliance Jio Infocomm, India Ratings and Research (IndRa) said in a report where it also revised its FY18 outlook for the sector to negative from stable-to-negative.
In a report issued Thursday, the agency said a redistribution of market share among the existing telcos is underway as Jio gained a quick subscriber base of 72 million by January 2017 and that could cross 100 million by March 2017. Jio’s ability to retain market share would be driven by both pricing as well as user experience, given the choice of complete reliance on voice over LTE (VoLTE) technology.
The ratings agency said the Indian telecom industry could witness the increase in the dual-sim phenomena in the interim, where data and voice usage pattern for each telco could remain inconsistent and unpredictable. “Retaining customer base will necessitate the telcos to continue to augment their capacity and coverage for superior speed and virtual network platforms,” it added.
The ratings agency said consolidation in the industry will help a quicker return of pricing power. The proposed merger of Vodafone and Idea Cellular will be positive for the telecom industry by eliminating duplication of the spectrum and infrastructure capex, the agency said, adding smaller telcos may not be able to sustain cash burn by operating
ability to retain market share to be driven by both pricing as well as user experience, given the choice of complete reliance on VoLTE technology moderation in voice realisations expected to drop to paise per minute from paise currently independently and are looking for exit options. The agency estimates per capita data usage will increase 3540% in FY18 to 1,250MB, up from 600MB in FY16 and a projected 900MB in FY17.
A decline in data tariffs by 2030% will pull down average revenue per user despite higher volumes coming from a rise in data usage, the agency said. Ind-Ra expects voice revenue to moderate in FY18 on stagnant minutes of usage (MoU) and on further moderation in voice realisations expected to drop to 25-28 paise per minute from 30-35 paise currently.
Incumbent telcos are moving towards more bundling of voice and data plans in line with RJio’s voice calling bundledfree with data.
Ind-Ra expects voice revenue to moderate in FY18 on stagnant minutes of usage (MoU)
average revenue per user (ARPUs) is slated to decline in FY18
Blended average revenue per user (ARPUs) is slated to decline 10% in FY18.
“Credit profile is likely to weaken in FY18 with a fall in profits and a rise in debt due to spectrum and network-related capex. Free cash flows will be negative due to the double whammy of weaker earnings and capex. Telcos will balance debt levels through monetising non-core assets in order to mitigate the pressure on credit profiles,” the agency said.
Its negative outlook for the sector reflects Ind-Ra’s expectation of longer and deeper than expected deterioration in the credit profile of telcos following the extended free services by Reliance Jio, it said.
Jio’s Further 25-28 30-35 Blended 10%