Jio continues to rule market; incumbent telcos to suffer poor profitability

India Ratings & Research (Ind-Ra) has estimated that India’s incumbent telecom service providers will be hit harder in the coming time, thanks to Reliance Jio Infocomm's aggressive pricing strategies.

As per the rating company’s report, telcos "would continue to lose market share to Jio and suffer from poor profitability in FY18." This would also substantially increase their debt burden, because of spectrum-linked payouts and network-related expenditure.

The report expects "longer and deeper than-expected deterioration in the credit profile of existing telcos following free services extended by Jio."

Ever since Jio started its commercial operations in September last year, it has proven to be a nightmare of sort for rival telcos, thanks to its promotional packages of free voice and data services, followed by aggressively priced subscription plans.

Also read: Airtel, Idea, Rcom are not going to be happy with their revenues, thanks to Reliance Jio

Jio’s popularity can be estimated by the number of its paying subscribers at the end of its promotional offers, which went up to 72 million by the time March ended.

This popularity has forced other telcos to slash their prices in order to retain customers; however, the risk to the voice revenue of the older telcos can’t be swayed because of Jio’s declared strategy of lifetime free voice calls.

"There is a structural shift in pricing plans, which will move towards bundled tariffs with free or discounted voice," says the Ind-Ra sector outlook report.

The rating agency report stated that pricing stabilisation is critical to get the industry stable, further adding that return of pricing power and substantially higher data volumes would also be required, so that telcos could get their desired return on large investments.