When Mukesh Ambani launched Reliance Jio he promised high speed 4G data across India. But, he has failed to keep the promise it seems! The 4G data speed of Reliance Jio declined by about 20 per cent in October across 17 circles. According to a report by CLSA, Reliance Jio saw a 20 per cent fall in speeds from 7.2 mbps in September to 6 mbps in October and with 17 of the 22 markets reporting the fall, a quick subscriber ramp-up led by ‘free offers’ impacted service quality in most markets. Jio’s current speed of 6 mbps is almost half of Airtel’s 4G speed of 11.47 mbps, which is likely to help Airtel retain its market share lead. During the same period, Bharti Airtel saw an increase in speeds in 10 of its 16 4G markets and also expanded its 4G service to cover 19 of the total 22 markets. Reliance’s disappointing 4G speeds might have a favourable impact for Airtel which may be able to hold on to its market share. “We are positively surprised by the network outperformance of Bharti Airtel and maintain that it remains a key driver of market share gains. Among the four large operators, while Bharti Airtel and Idea Cellular have improved/maintained 4G speeds, Vodafone and Reliance Jio have seen a fall,” CLSA said.
The findings are part of CLSA’s second edition of quality of service tracker, which analyses the Telecom Regulatory Authority of India’s speed test data based on 2.5 million and 0.5 million samples on 4G and 3G networks, respectively. At 6 mbps, Reliance Jio’s speeds were similar to the average speeds of Idea Cellular and Vodafone at 7 mbps but nearly half of Bharti’s 11.5 mbps. The research firm said if Reliance Jio’s 4G speeds do not improve, the new entrant might extend “free offers” beyond December adding risks to the data pricing of incumbents.
Separately, Fitch on Friday said that Reliance Industries’ arm Jio faces stiff competition from financially strong incumbent telecom players like Airtel and future capex will depend on growth of its customer base. Fitch re-affirmed ‘BBB-minus’ rating on RIL with stable outlook on strength of its robust refinery and petrochemical business and expects benefits from its investments in the core business to start accruing from 2017-18. The rating agency, however, expected RIL to be able to take advantage of the strong growth potential in the Indian telecom market as it has invested significantly in infrastructure that would cover 90 per cent of the population by 2017-18 end.
“Jio will face intense competition from the financially strong incumbent Indian telecom players, but we believe falling data tariffs will support significant expansion of overall data consumption in India over the medium term,” it said, adding that the robust infrastructure along with its affordable 4G data offerings will support Jio’s growth. Fitch said it expects “Jio’s wide range of offerings, including media and entertainment content, to help in subscriber additions and data consumption, which will drive cash generation”.
RIL also continues to face challenges in its upstream oil and gas operations with declining production and weak prices. “We expect RIL’s upstream operations to remain weak over the short term because of weak oil and gas prices, and geological challenges in its domestic fields,” it said. The company’s ongoing investments will drive up RIL’s debt levels in the current fiscal. “However, Fitch expects its financial profile to improve from 2017-18 onwards with higher cash generation from its refining and petrochemical operations,” the statement said. Expecting financial leverage to improve by 2018-19, Fitch said this provides some rating headroom under its unconstrained-‘BBB’ credit profile during its ongoing heavy investment in the telecom operation.