Stabilisation in telecom industry is possible but, still some quarters away: ICRA

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According to the new report by rating firm ICRA, it has been one year since Reliance Jio Infocomm Ltd. (RJio) launched its operations, and during this period the Indian telecom industry has witnessed a phase of severe turbulence.

Stabilisation in telecom industry is possible

The period was characterized by heightened competitive intensity, pricing pressures, and decline in revenues and profitability, all at a time when the industry was already saddled with elevated debt levels. Going forward.

However, ICRA expects that the stabilization of the industry is possible but, still some quarters away.

Harsh Jagnani, Sector Head & Vice President - Corporate Ratings, ICRA: "Challenges aside, the last one year has seen many transformations in the industry namely - initiation of consolidation, higher data usage, revamp of pricing plans, and the greater focus on quality, technology, and content. However, a realization of any upside from these changes is some time away with a difficult transition period. The pricing pressure currently faced by the industry is expected to translate into the decline in profitability for FY2018 as well after the weak H2FY2017, presenting high credit risk, with pockets of stressed debt which may require inorganic funding."

Jagnani says that "At the same time, the telcos would have to consistently invest in networks to keep pace with the strong data growth - the CapEx intensity for the industry is expected to remain upwards of Rs. 50,000 crore per annum."

In the ten months since its launch, the market share of the three large incumbents along with RJio has been steadily improving. They together hold active subscriber market share (SMS) of 74.4 percent (up from 67.8 percent in June 2016) and revenue market share (RMS) of 76.9 percent (up from 73.3 percent in June 2016).

ICRA said that, over the last few months, the data usage in the country has increased from less than 200 MB per month per subscriber to more than 1000 MB per month, with potential for further growth, on the back of increasing content. Another emerging trend for the industry is the move towards simplified and bundled tariff plans. Given the unlimited voice and sizeable data quantum now being offered by the operators for around Rs. 150 per month, the per month revenue from most of the subscribers in the industry is likely to migrate to Rs. 100-200, as compared to a much wider range earlier.

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