Top four telcos to come under pressure with Reliance Jio’s entry: Fitch

By November 20th, 2015 AT 5:18 PM

Country’s top four telcos–Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communication, will see their 2016 credit profiles under pressure as Reliance Jio’s entry will curb the rise in data average revenue per user (ARPU), according to Fitch Ratings.


Notwithstanding the rising data usage, the industry blended tariff will fall by 5%-6% as voice ARPU will continue to fall due to cannibalisation by data and blended monthly ARPU will dip by 5-6% to around Rs 160.

The incumbents will compete on price with Reliance Jio, which is likely to offer cheaper data tariffs to build market share. The top-four telcos will generate minimal free cash flow (FCF) due to higher capex and flat EBITDA. The 2016 industry capex/revenue could rise to 19%-20% as companies invest to meet the challenges of fast-growing data traffic and the new competitor in Reliance Jio.

“We expect industry revenue to grow by the low-single-digits (2015: 9%), driven solely by data services as voice matures and subscriber growth slows. Data’s contribution to revenue will rise to around 25%-27% as data traffic will double -aided by the proliferation of cheaper smartphones, lower data tariffs and improving content availability,” the rating agency said.

The top four telcos’ average operating EBITDA margin will narrow by 100bp-200bp (basis points) owing to pricing pressure on the higher-margin data services and a rise in marketing spend as data competition rises.

Having over six years of experience in business journalism, Krishna has a knack for writing on telecom and IT. She believes that tryst with technology is the best thing that has ever happened to the mankind. Krishna is a telecom analyst with CMR

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Maghsoodvishal khannaGokuJOYsajid Recent comment authors
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Another looter jio

vishal khanna
vishal khanna

jio has same story like reliance comm. after some time jio services and network are same like reliance network. dondthe reh jaoge signals (no where signals were found)


Rim had provided best quality services&maintained an international company standard when it had with Mukesh ambani.They was provide customer service centre(its name was Webworld) in each service area.After partition Anil ambany got Rcom&Mukesh withdrawan his hand from telecom.Then rcom had lost everything.


Sunil Mittal has already said that the launch of Jio will lead to more consolidation like the Sistema Reliance merger. Already all the competitors of Jio are rushing to launch 4G services by December, data prices are behaving like crests and troughs already with no consistency, which shows the operators are looking to hit the right mark in terms of price, rate of new data subscribers being added to the network is at an all time high even with costly data packs, all these just shows that the launch of Jio will be nothing short of a tsunami in the… Read more »

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