Reliance Jio has threatened top telcos’ major revenue contributor with free voice offering

Reliance Jio has threatened India telecom operators’ major revenue contributor, voice, with the launch of life-time free voice calls, and its launch strategy will squeeze operational cash flows of the Indian telecom sector in Fiscal year 17-18, according to India Ratings and Research (Ind-Ra).


Top telcos such as Bharti Airtel, Vodafone and Idea Cellular’s debt burden will also go up with the increase in spectrum and non-spectrum debt capital expenditure (Capex), and the upfront spectrum payouts in the fiscal year 2017, along with ramped up network capex will keep their free cash flows (FCF) negative, the agency said.

According to Ind-Ra, the immediate concern for the auction spectrum winners will be to put in place an optimal funding mix to meet the upfront payment of Rs 320 billion and subsequent staggered payments.

It said that incumbent operators have the existing balance sheet strength to raise funds from the domestic or global markets. “However, identifying the right long term funding mix to optimise the cost of funds and the monetisation of non-core assets to reduce the debt burden will be crucial for the credit profile,” the agency added, noting that funding for the new spectrum will be a combination of equity and debt for all players.

Vodafone has already raised equity of Rs 477 billion, which will be used for the upfront spectrum payment and also support additional capex. Idea Cellular has incremental capex plan of Rs 10 billion post the spectrum acquisition, and its upfront payout for the spectrum will be part-debt funded given its moderate cash balances.

Bharti Airtel had Rs 20.5 billion of cash and equivalents at end of first quarter, hence part debt funding could be used for the upfront spectrum payment.

The agency said that spectrum bidding by Indian telcos was rational and it is maintaining its outlook on the sector as “Stable to Negative”. “Telecom companies exercised a balanced approach in the recent spectrum auctions, however the purchase of spectrum and non-spectrum linked capex will keep free cash flows (FCF) of the telecom operators negative,” Ind-Ra said.

There were no takers for the pricey 700MHz band and 900MHz, while active participation was seen in the 1,800 Mhz and 2,300MHz bands, and the most active participants were Vodafone India and Idea Cellular.

“Each operator’s spectrum acquisition strategy was to ensure data capacity build up, which was indicated by the bigger block spectrum acquisition in the higher bands of 2300MHz/2500MHz,” the agency said.

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42 Comments on "Reliance Jio has threatened top telcos’ major revenue contributor with free voice offering"


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October 19, 2016 9:36 am 9:36 AM

Atleast Reliance Jio have no excuse on reducing their own 4G data speed.. Slowly Reliance Jio is making this a vengeance game with incumbent operators and not improving there own available quality of service.

October 19, 2016 8:42 am 8:42 AM

In night speed get worst

Udaykiran K
October 19, 2016 7:19 am 7:19 AM

Signal is too poor and data is too slow even though tower is less than 40mts. Previously it was good , day by day it getting worst. I have given complaint, but no response from their side.

Abhijan Pal
October 19, 2016 11:43 am 11:43 AM

Signal strength can vary on handset to handset. Because all 4G handset won’t support 850MHz(Band 5). Even all VoLTE handset won’t support 850MHz(Band 5) like redmi 2 / prime, moto g3 etc. What your handset model?

October 19, 2016 12:20 pm 12:20 PM

Do not say some blame excuses. The signal strength even at open spots at most of the places is worst. It is like wifi signal (if you enter a room with just one wall barrier facing towards a open area, the coverage becomes worst).

I am using the branded company Samsung Note 4 SM-910G and the coverage is worst only in case of Jio. What do you say now?.

Abhijan Pal
October 19, 2016 3:25 pm 3:25 PM

If your handset support Band 5 then No comments.

October 19, 2016 8:32 am 8:32 AM

I feel you. I have the same problem with their network.