Exit of smaller telcos is good for industry structure: India Ratings

Idea Cellular Limited and Vodafone India Limited merging with each other.

By Priyanka
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According to the new report by research firm India Ratings, the exit of smaller telcos is good for industry structure in the long-term but painful for the stakeholders including lenders and Reliance Communications Limited with Aircel Limited is uncertain due to a rejection of their merger due to regulatory/legal reasons.

Exit of smaller telcos is good for industry structure: India Ratings

 

RCOM and Aircel Limited (Aircel) had signed binding agreements in September 2016 for the merger of RCOM's mobile businesses with Aircel. Legal and regulatory uncertainties and various interventions by vested interests have caused inordinate delays in receipt of relevant approvals for the proposed transaction.

But due to unprecedented competitive intensity in the Indian telecom sector, together with fresh policy directives adversely impacting bank financing for this sector, have also seriously affected industry dynamics. As a result of the various factors aforesaid, the merger agreement has lapsed.

India Ratings said that Tata Teleservices Limited/Tata Teleservices (Maharashtra) Limited (TTML - 'IND A'/RWE) - Bharti Airtel Limited deal was inevitable, as the wherewithal to survive was diminishing for smaller telcos ever since RJio entered the telecom landscape.

The consolidation has accelerated in the last 12-15 months with Telenor India (Communications) Private Limited merging with Bharti Airtel Limited, while Idea Cellular Limited and Vodafone India Limited merging with each other.

Reliance Jio Infocomm Limited wherein the company has reported a positive EBITDA of Rs 14.4 billion and an average revenue per user (ARPU) of Rs 156, which is way above the average industry ARPU of Rs 83 in 1QFY18, and is comparable with ARPU of Bharti Airtel Limited (Bharti) at Rs 154 for 1QFY18.

RJio ARPU for 1QFY18 is Rs 156, which is significantly higher than the industry ARPU of Rs 83 in the quarter ending June 2017. During the same quarter, the average ARPU for top telcos declined by up to 20 percent across top circles.

 

RJio has been able to maintain momentum in subscriber acquisition on a monthly basis, garnering 10.8 percent subscriber market share by August 2017.

RJio's data consumption per user is 10GB, is well above the industry average. This indicates the structural shift in data consumption habits which are likely to pull the average industry up. Broadband proliferation is also increasing while a number of narrowband subscribers are decreasing qoq.

Read More About: reliance jio telecom news

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