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  1. Union Budget 2017: Reliance Jio entry has hit rivals’ capacity to repay debt, says Economic Survey

Union Budget 2017: Reliance Jio entry has hit rivals’ capacity to repay debt, says Economic Survey

The entry of Mukesh Ambani-led Reliance Jio Infocomm in the fiercely competitive telecom market has further impacted the capacity of rival mobile operators to meet their interest payment obligations.

By: | New Delhi | Published: February 1, 2017 6:01 AM
Reliance Industries Ltd Chairman Mukesh Ambani Although RJio launched its commercial operations in September 2016, October-December is the first quarter when the full impact of its launch will be visible on the other operators. (Reuters)

The entry of Mukesh Ambani-led Reliance Jio Infocomm (RJio) in the fiercely competitive telecom market has further impacted the capacity of rival mobile operators to meet their interest payment obligations. “Stress has expanded to the telecom sector, where interest coverage ratios have deteriorated as the new entry has increased competition, prompting a major round of price-cutting. In short, stress on the corporate sector is not only deepening; it is also widening,” the Economic Survey said.

It explained that stressed firms are consequently facing an increasingly difficult situation. Their cash flows are deteriorating even as interest obligations are mounting and if they borrow more, this will only cause the gap to widen.

Market analysts say that the domestic telecom sector is sitting on a debt of around $60-65 billion.

RJio is offering its subscribers free unlimited voice and data, forcing rivals to come out with plans offering unlimited voice and higher 3G/4G data at lowest possible prices.

Although RJio launched its commercial operations in September 2016, October-December is the first quarter when the full impact of its launch will be visible on the other operators. Market leader — Bharti Airtel — which reported its third quarter results last week saw its net profit plunge to the lowest in the last four years. Others like Vodafone India, Idea Cellular and Reliance Communications (RComm) are still to report their December quarter numbers.

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