Airtel to Avoid but Jio Could Raise Tariffs to Generate Return on Investment: Fitch

Reliance Jio, the 4G entrant, may raise tariffs in the medium term to start generating a return on its massive investment of $27 billion-$30 billion, rating firm Fitch Ratings said, adding that India’s leading telecom operator Airtel may not raise tariffs due to market pressure.

“We believe that Jio may continue to disrupt the market by offering cheaper tariffs than the incumbents to gain market share. Ongoing industry consolidation will leave only five telcos in the market, will bring back pricing power to incumbents only after one to two years,” analysts at Fitch said.

Fitch, in a note, said that it has an adverse outlook on the Indian telco market. “We expect the credit profiles of the top four telcos to come under pressure from tougher competition and greater capex requirements,” it said.

The agency said that Airtel’s blended average revenue per user (ARPU) could remain flat at around Rs 160 ($2.4) as the telco is unlikely to be able to raise tariffs, given the price competition.

Airtel

Fitch Ratings on Friday affirmed India-based Bharti Airtel Limited’s Long-Term Foreign Currency Issuer Default Rating (IDR) and senior unsecured rating at ‘BBB’. It said that Bharti’s ‘BBB’ rating reflects its established market leadership in the Indian wireless services industry.

Airtel has about 35% revenue market share, has diversified and integrated operations and owns a large share of Indian spectrum assets, which are also the most efficient assets. “We believe that its established market position and diversified revenue base will help it withstand intense competition in the Indian mobile segment. It gained about 150bp of revenue market share in 2016 as smaller telcos exited due to fierce competition and another 200bp with the acquisition of Telenor India, which is subject to regulatory approvals,” Fitch said.

The agency expects Bharti’s FFO adjusted net leverage to worsen to 2.0×2.2x for the financial year ending March 2018 (FY18), from 1.9x in FY17 (excluding USD6.8 billion deferred spectrum costs). “However, we forecast leverage to remain below 2.5x, above which we will consider negative rating action. Bharti is committed to its investment grade rating. We do not expect large debt-funded acquisitions during FY1819 given management’s strategy to reduce debt through the possible sale of a 10% stake in tower subsidiary, Bharti Infratel or sale of other assets,” it added.

Fitch forecasts Bharti Airtel’s FY18 revenue and EBITDA to decline by 2%-3% as growth in non-mobile segments in India, and its African operations may not fully offset the fall in the Indian mobile segment’s revenue. Indian mobile EBITDA (63% of consolidated EBITDA) could decline by 5%-10% in FY18.

“Competition is likely to remain intense as new entrant Reliance Jio (Jio), part of Reliance Industries Ltd (BBB/ Stable), will continue to offer cheaper tariffs to gain market share from incumbents,” Fitch said.

Fitch said that Bharti Airtel has sufficient spectrum assets to expand its data services in the medium term and will not need to acquire more spectrum. It is unlikely to bid for 700MHz spectrum as the efficiency gains from the 700MHz spectrum do not currently justify the high reserve price set by the regulator.

“We forecast minimal Free Cash Flow (FCF) in FY18 (FY17: FCF deficit of INR62 billion) as cash flow from operations of Rs 250 billion- Rs 260 billion will be insufficient to fund its large capex requirements and moderate dividends. It will likely invest about Rs 260 billion- Rs 280 billion during FY1819, including its core capex of Rs250 billion and around Rs 30 billion- Rs 40 billion for payments related to deferred spectrum cost. The company needs to continually make investments to support its fast-growing data services,” the agency said.

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218 Comments on "Airtel to Avoid but Jio Could Raise Tariffs to Generate Return on Investment: Fitch"

 

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Renju
May 29, 2017 5:24 pm 5:24 PM

Airtel speed at Kerala

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Sandy
May 29, 2017 11:18 pm 11:18 PM

This is usually the condition of empty network.
Are u staying in village?

Kirti Khurana
May 30, 2017 3:21 pm 3:21 PM

why every blind jio bhakt thinks every thing is empty but only they are superior

Kunal
May 31, 2017 2:02 pm 2:02 PM

Same like All jio haters that think jio is sub standard.

Jio haters never get above 1 mbps speeds pan india & also voice calls hardly connect .

Even before jio bb is actually rolled , haters are already discouraging & insisting to try all bb providers except jio.

Renju
May 30, 2017 12:21 am 12:21 AM

Nope the speed i got in technopark, trivandrum. i belive its not a village.

Kaushik
May 30, 2017 4:50 pm 4:50 PM

In general airtel and Vodafone have good 4G speeds compared to others. But not everyone needs everything to run at 40mbps, hehe. 5-6 Mbps is enough for my use anyway. 🙂

Jio lover
May 30, 2017 6:53 pm 6:53 PM

True enough

Sahil Shah
May 29, 2017 6:41 pm 6:41 PM

Wow amazing.. jio is way too far behind..

Kirti Khurana
May 30, 2017 3:21 pm 3:21 PM

years behind

Mahi
May 30, 2017 12:14 am 12:14 AM

Agreed

Mahi
May 29, 2017 2:11 pm 2:11 PM

Vodafone speed in Bangalore. Bye Jio. Feeling bad to have wasted 3500 for that lyf handset. Anyway, sold that.

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Sandy
May 29, 2017 11:19 pm 11:19 PM

Gud.. now enjoy being a british s .

Mahi
May 30, 2017 12:06 am 12:06 AM

Nice language, bro. Appreciate it.

Girish Gowda
May 29, 2017 6:08 pm 6:08 PM

Don’t forget that vodafone said you and your fellow Indians were not good enough to access 4G last year.

Mahi
May 30, 2017 12:13 am 12:13 AM

I know that very well. I’m staying with them only because they are offering me quality data service, and also 16GB per month at 399.
Else I would have ported long time back to other operator (Airtel) for data benefits.

Their on-net 3G calling has better voice clarity than Jio’s VoLTE. Jio has good speeds only when I cross Bengaluru limits. Inside Bengaluru it is worst.

Kaushik
May 30, 2017 4:52 pm 4:52 PM

Companies are doing a lot for retention. I am getting 15GB for 399 with a 300 rs bill discount from Rcom. Retention offers are excellent, so for now I continue. I too considered porting at many times.

Jio lover
May 30, 2017 6:54 pm 6:54 PM

So u mean u r getting rs 399 plan in 99 rs???

Jio lover
May 30, 2017 8:18 pm 8:18 PM

Kaushik how did u manage such huge discount in rcom plan…

SUDHAKAR
May 29, 2017 1:32 am 1:32 AM

Off topic :

Zain Kuwait gives 3072 GB (3 TB) of internet for 5 Kuwait Dinars with 30 days validity as ramzan offer. Whoaaa. The normal data capacity for 5 KD is : 40 GB day + 40 GB night for 30 days. This ramzan offer is far more cheaper than jio and all other operators. I still laugh out loud comparing the 5 KD ramzan offer by Zain Kuwait with Rs.786 offer by reliance GSM !!!.

Girish Gowda
May 29, 2017 5:58 pm 5:58 PM

While everyone else is still laughing over sudha’s nonsensical, crazy behaviour.

Arena
May 29, 2017 3:35 pm 3:35 PM

Jack sudhakar understand ethnographic challenges and market demographics? for comparison. India has more user density than Kuwait. So more users under each tower…so what will be the load if given plans like that…In India you make your whole family use hotspot with 1 SIM in your data card. So ARPU takes the hit. As well the quality of services. You make me laugh with my

SUDHAKAR
May 29, 2017 6:47 pm 6:47 PM

Ok. Compare any state that is similar in size to Kuwait. Can you?.

SUDHAKAR
May 29, 2017 6:47 pm 6:47 PM

In Kuwait all 3 operators provide 2G, 3G and 4G everywhere in Kuwait. Again density?. Uff.

Kirti Khurana
May 29, 2017 11:11 am 11:11 AM

provide a speed test too, because anything below 10 mbps is waste.

Sudhakar
May 29, 2017 12:33 pm 12:33 PM

The previously attached file is the speed if Zain network Kuwait when tested using Huawei E8231 WiFi data card at full strength.

Sudhakar
May 29, 2017 12:29 pm 12:29 PM

See the attached file. I have attached unless tt moderators remove it.

Screenshot_2017-05-29-09-57-32.png
Girish Gowda
May 29, 2017 6:10 pm 6:10 PM

How do you keep this in your pocket for wifi on your phone all the time?

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