Tele­com Price War in Fi­nal Stages: S&P

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

In­dia’s big phone com­pa­nies may be burn­ing cash amid bru­tal com­pe­ti­tion for mar­ket share, but the fight for sub­scribers by of­fer­ing rock-bot­tom prices trig­gered by the en­try of Reliance Jio In­fo­comm “is in its fi­nal stages”, S&P Global Rat­ings said on Tues­day.

The global rat­ing agency ex­pects the Mukesh Am­bani-run 4G new en­trant to “ra­tio­nalise its com­pet­i­tive strat­egy at some point over the next 12-18 months and start fo­cus­ing on achiev­ing sus­tain­able rev­enue and mar­gins”.

“Jio, through heavy dis­count­ing, has man­aged to grab 10% of the coun­try’s telco sub­scriber base in less than a year, but costly dis­count­ing prac­tices can­not last for­ever,” Ashutosh Sharma, S&P Global Rat­ings credit an­a­lyst, said. But the global rat­ings agency con­ceded that Jio’s ag­gres­sive tac­tics have been “a strain on rev­enue, prof­itabil­ity and cash flows of all con­tes­tants in this game”.

In­dia’s rag­ing tele­com bat­tle, ac­cord­ing to Sharma, has “all the in­gre­di­ents of a ‘Hunger Games’ movie, the com­bi­na­tion of ri­valry, power plays and elim­i­na­tion of the weak, has in­vestors, fi­nanciers, an­a­lysts and the gov­ern­ment on the edge of their seats”.

S&P also ex­pects telco mar­gins and cash po­si­tions “to be fur­ther chal­lenged be­fore they get bet­ter”, and ex­pects rev­enues to de­cline 5-10% in FY18.


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