‘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

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

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%

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