The low cost tariff plans unveiled by RJio had a ripple effect on the stock markets with the shares of incumbent service providers like Bharti Airtel and Idea Cellular plunging sharply on Thursday.
The low cost tariff plans unveiled by RJio had a ripple effect on the stock markets with the shares of incumbent service providers like Bharti Airtel and Idea Cellular plunging sharply on Thursday.
The shares of Bharti Airtel, tanked 6.37 per cent on the BSE while its competitor Idea Cellular plummeted 10.48 per cent as investors turned cautious towards the entire telecom sector.
Even the shares of RIL were not spared — it was down 2.73 per cent. The markets believe that the free voice call plans and record low data charges announced by Jio would intensify competition in the industry that is already reeling under financial stress, high debt burden and slowdown in revenue growth.
“Further decline in data tariffs may impact operators ’ profitability and sustainability. Telcos form the backbone of ‘Digital India’ and they need to make higher investments in data network. Any market erosion, at this stage, may impact the outcome of the upcoming Rs 80,000 crore spectrum auction critical for the Digital India vision,” said Prashant Singhal, global telecommunication leader, E&Y.
Rating agency India Ratings & Research, believes that data traffic is bound to see a major correction due to the disruptive launch of RJio, “Reliance Jio may look to disrupt some of the prominent geographies of existing operators, leading to a re-distribution of the market share which is concentrated among the top three operators, in FY17,” it said.
