1. Fitch sees Reliance Jio losing users when paid service starts; here’s how it may help Airtel

Fitch sees Reliance Jio losing users when paid service starts; here’s how it may help Airtel

Fitch said that while Reliance Jio’s will use some tools to retain subscribers, Airtel’s position and strength will help it face competition and offset revenue impact.

By: | Updated: January 25, 2017 4:12 PM
Fitch Ratings expects Airtel to benefit later when Jio starts losing customers upon the start of paid service. Fitch Ratings expects Airtel to benefit later when Jio starts losing customers upon the start of paid service.

Even as Bharti Airtel posted a 55% on-year fall in fiscal third quarter net profit mainly due to strong competition from Reliance Jio’s freebies, Fitch Ratings said on Wednesday that it expects Airtel to benefit later when Jio starts losing customers upon the start of paid service.

Reliance Jio is expected to have 100 million subscribers by March this year, Fitch Ratings’ Nitin Soni said in an interview to BTVi.

While Reliance Jio’s will use some tools to retain subscribers, Airtel’s position and strength will help it face competition and offset revenue impact, Soni told BTVi.

Earlier yesterday, Bharti Airtel, India’s largest telecommunication services operator, said that its consolidated net profit for the fiscal third quarter fell to Rs 504 crore, less than half of that in the same quarter a year ago. The fall was much sharper than street expectations, hurt by a tariff war due to Reliance Jio’s entry leading to a sharp fall in money earned per customer, demonetisation and exceptional one-time costs.

Want to know more? Check out the details here: Reliance Jio hurts Bharti Airtel as Q3 net falls to less than half on-year; read how

Here’s why Nitin Soni is still bullish on Bharti Airtel despite a challenging quarter and year ahead:

Waning competition
Fitch expects Reliance Jio to start losing some customers when it starts charging money from users after the end of free offer period, easing some pressure for the incumbents. Though, it expects Jio to have 100 million users by March of this year.

“There will obviously be some churn thereon when they start charging from April, though we will have to see how much,” Soni said. At that time customers will compare what Jio is offering versus incumbents, and may choose the services based on costs, quality, offerings, etc, Soni added.

Reliance Jio had been adding 600,000 new users per day and had about 72.4 million subscribers at the end of December – just four months of starting operation.

However, he also said that Reliance Jio may have an upper hand with its holistic packages including free music, movies and videos, which may help it retain customers.

Strong player
Fitch sees other telecommunication companies such as Idea and Vodafone getting affected more than Bharti Airtel due to competition from Reliance Jio, on the back of its market strength. “Given its market leadership position and spectrum assets that they hold, Bharti Airtel is in the best position to withstand this kind of competition,” Soni said, adding that it is yet to be seen how significantly will it be hurt.

Soni said the next 12 months will be very challenging, but there will be some reversal after that “when companies realise that they have to start earning some return on their investments”. Industry will need to start earning some money against the investments they have made, he said.

Fitch has a BBB- rating on Bharti Airtel with “stable outlook”. It has “negative outlook” on the Indian telecom sector, which it expects to be worse off due to competition from Jio.

It expects Jan-Mar quarter to see steepest fall in all operating metrics for Bharti Airtel, such as ARPU, profit and EBITDA margin.

Other services
Fitch sees growing earnings from Bharti Airtel’s other services to offset impact on its mobile services. Soni said Bharti results were better than he had expected, in terms of its India EBITDA rising about 1%.

“Competition will keep pressure on mobile EBITDA for the next quarter, but its other segments such as home broadband and digital TV are performing better and are offsetting revenue impact,” Soni said.

“India other businesses have witnessed healthy growth, eg 17.7% in digital TV, 12.5% in Airtel Business and 10.8% in Homes on year-on-year basis,” Bharti Airtel had said yesterday.

Though, Soni expects Bharti Airtel’s data ARPU (average revenue per user) to fall further from its Oct-Dec fall of 12-13%.

 

 

  1. A
    Arnav Joshi
    Jan 25, 2017 at 11:16 am
    Jio has enough subscribers by now to lose some of them. :p Jokes apart, they sure must've thought of this and will definitely come up with some offer to convert the subscribers to permenant users! Apart from that, honestly speaking Jio has way better offers and services than Airtel. Jio speed is also getting better!
    Reply
    1. V
      VJ
      Jan 25, 2017 at 11:46 am
      Where is FITCH link that shows what they see & you described here ?
      Reply

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