The entry of Reliance Jio Infocomm in the telecom space will intensify competition and may bring data tariffs down by at least 20 percent, Fitch Ratings said today. Also Read - DoT permits telecom service providers to go ahead with 5G trials
It, however, said no tariff wars are expected as witnessed during the 2009-2013 period. “The likely entry of new telco Reliance Jio, which is a part of Reliance Industries Ltd in 1H15 will intensify competition in the data segment, and may cause data tariffs to decline by at least 20 percent,” Fitch said in its 2015 outlook for Indian telecommunications services. Reliance Industries had announced that it would launch commercial 4G telecom service of RJio in 2015 entailing investment of Rs 70,000 crore. Also Read - Facebook invests Rs 43,574 crore in Reliance Jio; buys a 9.99 percent stake
Fitch said Jio will focus largely on data and may have a limited impact on the incumbents’ core voice business, given a weak “voice-over-LTE” technology ecosystem and lack of affordable 4G-compatible handsets in India. “We do not foresee a re-run of the tariff wars of 2009-2013, which led to a severe decline in industry tariffs,” Fitch said. Fitch expects the top four Indian telcos – Bharti Airtel Limited (Bharti; BBB-/Stable), Vodafone India, Idea Cellular and Reliance Communications – to increase their revenue market share to around 83 percent by 2015 from the current 79 percent in the $30 billion industry. Also Read - Reliance Industries to buy majority stake in Den Networks, Hathway Cable; reports increase in Q2 net profit
“Industry revenue will grow by at a mid-single-digit rate in 2015, driven by data services. The top four telcos’ 2015 average operating EBITDA margin will be mostly unchanged at 32-33 percent (2014: 32 percent) as a decline in data tariffs will offset a gradual rise in voice tariffs,” it said. Fitch said the top four telcos will generate a minimal free cash flow (FCF) margin due to higher capex and flat EBITDA; the 2015 industry capex/revenue ratio could rise as fast-growing data traffic requires supporting investment.