Reliance Jio To Gain Market Share From Existing Operators: Report

New telecom entrant Reliance Jio is likely to gain market share from existing telecom operators, ratings agency India Ratings and Research said while revising its outlook on India's telecom services sector outlook from 'stable' to 'negative'. Poor profitability for incumbent telecom players such as Bharti Airtel, Idea Cellular, Vodafone and Reliance Communications will continue in financial year 2017-18, India Ratings further said in its report.  "The existing telcos would lose market share to RJio and suffer from poor profitability while their debt burden will increase due to spectrum and network related capex," it said.

India Ratings also said that the data tariffs are likely to come down further in the current financial year. "Decline in data tariffs will pull down average revenue per user (ARPUs), despite higher volumes, while voice revenue remains at risk due to Reliance Jio's declared voice pricing strategy," said Indian Ratings, or  In-Ra.

India Ratings also highlighted in its report that the data usage was likely to increase by 35-40 per cent in current financial year to 1,250 MB.

"RJio's data-centric business strategy, proliferation of cheaper smartphones and accelerated adoption of 4G are catalysts for higher data usage," said the Indian arm of global rating agency Fitch Ratings.

Revised its outlook on the telecommunications services sector for FY18 to 'negative', Ind-Ra said, "The negative outlook reflects Ind-Ra's expectation of longer and deeper than expected deterioration in the credit profile of telcos following the free services extended by Reliance Jio Infocomm."

Ind-Ra expects data to form 30 per cent share of the telcom revenue in FY18  while data revenues would grow 15-20 per cent. Higher data volumes would not lead to a commensurate increase in revenues as data realisation would decline 20-30 per cent. Data price decline is driven by highly price elastic data demand as well as operating leverage, it added.

Jio - the telecom arm of billionaire Mukesh Ambani-led conglomerate Reliance Industries - recorded the highest average speed in 4G in March, according to telecom regulator TRAI. Data from the Telecom Regulatory Authority of India had shown Jio's average speed to be at 18.487 Mbps till 12.30 a.m, April 1 - the highest among other players like Bharti Airtel, Idea Cellular and Vodafone India.

Ind-Ra also pointed out that going ahead, there could only be four telecom companies in India as the telecom operators may go in for consolidation of market share and spectrum. "Not only are the smaller telcos highly likely to get acquired by the larger telcos, but also consolidation among the top telcos is possible, subject to spectrum and market share caps under the telecom merger & acquisition regulations."

Another ratings agency Crisil has also said that telecom companies will continue to face difficulties in fiscal year 2018. Two of the top three telecom firms are set to "bleed" due to intense competition triggered after the launch of Reliance Jio, Crisil had said in a report last month.

Meanwhile, Jio has become the largest network globally with more than 110 crore GB of data traffic per month and 220 crore voice and video minutes a day, Reliance Industries had earlier said, while reporting the group's earnings for financial year 2016-17.