Telecom industry is facing 20% revenue loss, all thanks to Reliance Jio’s free services

Indian telecom industry has lost around 20% revenues due to free services being offered by Mukesh Ambani led Reliance Jio, India Ratings and Research (IndRa) said on Thursday.

The agency said that a redistribution of market share among the existing telcos is underway as Jio gained a quick subscriber base of 72 million by January 2017 which could cross 100 million by March 2017.

Reliance Jio’s ability to retain market share would be driven by both pricing as well as user experience given the choice of complete reliance on voice over LTE (VoLTE) technology.

The ratings agency said that the Indian telecom industry could witness the increase in the dual sim phenomena in the interim, thereby the data and voice usage pattern for each telco could remain inconsistent and unpredictable.

“Retaining customer base will necessitate the telcos to continue to augment their capacity and coverage for superior speed and virtual network platforms,” it added.

The ratings agency said that consolidation in the industry will help a quicker return of pricing power.

Free cash flows will be negative due to the double whammy of weaker earnings and capex. Telcos will balance debt levels through monetising non-core assets in order to mitigate the pressure on credit profiles,” the agency said.

IndRa has revised its outlook on the telecommunications services sector for FY18 to negative from stable-¬to-negative.

“The negative outlook reflects IndRa’s expectation of longer and deeper than expected deterioration in the credit profile of telcos following the extended free services by Reliance Jio,” it said.