Revenue loss on account of demonetisation and competitive pressures, intensified by extension of free services by newcomer Reliance Jio, may lead to the telecom industry taking a hit of 5-7 per cent on revenue during the next two quarters, ICRA said today.
“At a time when the industry is reeling under Rs 4,25,000-crore debt, this extension of free services by RJio has added to the industry’s woes. Heightened competitive pressures would impact the performance of the telcos during the next two quarters that is Q3 and Q4 of FY2017,” Harsh Jagnani, Associate Head – Corporate Ratings, ICRA Ltd said.
The “revenue loss, owing to demonetisation and pressure on operating metrics due to competitive pressures, intensified by extension of free services by RJio, are expected to negatively impact the revenue of the industry by 5-7 per cent during the next two quarters”, Jagnani added.
Reliance Jio — which garnered 52 million customer base in the first three months of 4G launch — has announced extension of free domestic voice calls and data till March 31, 2017.
“At a time when the industry is already facing pressures on the operating metrics, owing to heightened competition, the extension of free services by RJio is expected to further push down the realisations in both the voice and the data segments,” he said.
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The impact is expected to be exacerbated by demonetisation which can lead to revenue loss of the telcos, especially in the pre-paid segment, he pointed out.
Terming Jio’s tariffs as “disruptive”, he said the offerings can translate into rapid subscriber additions (for Jio), which in turn would intensify the competition in the sector and increase the subscriber acquisition and retention costs for other operators.
In a separate report on Reliance Jio Infocomm, India Ratings assigned the company a Long-Term Issuer Rating of ‘IND AAA’ with stable outlook.
The agency has also assigned the company’s Rs 10,000 crore bank loan facilities an ‘IND AAA’ with a stable outlook and an ‘IND A1+’ rating. The key rating drivers include linkages with parent, the company’s large spectrum footprint, and nascent stage of operations.
“The agency expects continued adequate and timely tangible support from the parent for RJio’s debt servicing,” India Ratings and Research said.