According to the new report by India Ratings, the existing telcos would lose market share to the Reliance Jio and suffer profitability while the debt burden will increase due to spectrum and network related capex and the industry have lost approximately 20 percent revenues due to free services by Jio.
Meanwhile, the report (Ind-Ra) has revised the outlook on telecom sector for FY18 to negative from stable-to-negative. The negative outlook 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 Infocomm Limited.
The report also expects that data to form 30 percent share of the telco revenue in FY18, while data revenues would grow by 15 percent-20 percent. Higher data volumes would not lead to the commensurate increase in revenues as data realization would decline by 20 percent-30 percent. Data price decline is driven by as highly price elastic data demand as well as operating leverage.
Ind- Ra pointed out that RJio's launch has accelerated the consolidation of both spectrum and market share which could eventually lead to four private sector telcos in India. Adding that not only are the smaller telcos highly likely to get acquired by the larger telcos but also consolidation amongst the top telcos is possible, subject to spectrum and market share caps under telecom merger & acquisition regulations.
It also notes that voice revenue to moderate in FY18 on stagnant minutes of usage (MoU) and a further drop in call realizations to 25 paisa - 28 paisa per minute from 30 paisa - 35 paisa currently, as existing telcos are moving towards more bundling of voice and data plans in line with RJio's bundled plans offering free voice with data. Rural markets are hitherto providing positive net additions to the subscriber base, as against urban markets which have saturated
Reliance Jio has touched the 108.9 million customer base as on March 31, 2017, of which over 72 million signed up for Jio Prime.