Tariff war started by Reliance Jio is going to hurt revenues of mobile companies. Here’s how
When Reliance Jio unleashed a tariff war with free voice calls and lowest data prices, the incumbent mobile operators such as Airtel, Vodafone, Idea also followed suit to tackle the competition from Mukesh Ambani’s
Amidst this pricing war, the telecom players are losing out on the big picture-revenues. As per industry experts, a 6% growth is most likely to be seen by the top mobile carriers of India over the next four years. Due to disruptive price model, there has been a reduction in the data revenue growth rates from 70 % to 30 % last year and analysts have warned that in the upcoming mega spectrum auction, things will only turn bad for incumbent carriers.
Reliance Jio has pre-launched its free offers and it has enabled it to garner 20% data volume market share. This further started a data tariff war among the incumbents and a slowdown in overall data revenues for the sector.
Lower data growth is expected to be translated in top telecos reporting lower Ebitda (earnings before interest, tax, depreciation & amortization) over the next three years.
For instance, Idea Cellular’s Ebdita estimates has been cut in F17/F18/F19 by 6%, 11% and 9%, respectively by Morgan Stanley. Airtel’s Ebdita for F18/F19 is expected to be only 3% lower.
Reliance Communication’s Ebdita has been estimated by 16% and 18 % for F17 and F18 respectively.
“Multi-brand spectrum auction would lead to a higher 'net debt to
However, Bharti-Airtel’s is expected to stay comparatively lower at 2.4-to-2.5x as they expect India's No 1 mobile carrier to spend well under $1 billion in new spectrum purchases next month.
"We also expect Bharti's net debt/Ebitda to stay around 2.5x through F17-18 despite participation in the spectrum auction, given that it continues to de-lever in Africa, having already announced sale of assets worth $3.25 billion in the last 24 months," Goldman Sachs said in a note to clients.
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