Data tariff to fall 15-20 per cent after Reliance Jio entry, says Fitch
Fitch Ratings has slashed the telecom sector's outlook to 'negative' from 'stable' for 2016 and said the impending entry of Reliance Jio will increase the competition and pressurise credit profiles of top-four telcos.
The agency expects data tariffs to fall by at least 15-20% as incumbents compete on price with Jio, which is likely to offer cheaper tariffs to build market share and voice average revenue per user (ARPU) will decline on lower usage as rising data usage will cannibalise voice.
-"We expect competition to intensify as Reliance Jio, part of Reliance Industries, enters the market with likely cheaper and faster data-focussed tariff plans armed with sufficient spectrum and access to funds,-" Fitch Ratings said.
The agency added it expects the 2016 credit profiles of the top-four Indian telcos to come under pressure amid tougher competition, larger capex requirements and debt funded M&A. Fitch Ratings though retained the rating outlook on the sector as 'stable'.
-"We expect blended monthly ARPU to fall by 5-6% to around Rs 160 (2015: Rs 170) due to a decline in data tariffs, which will more than offset the rise in data usage,-" it said.
Fitch said it expect the incumbent telcos to offer discounts and promotions to higher-ARPU subscribers in anticipation of Jio's entry to prevent user attrition.
Jio is likely to launch its cheaper and faster 4G-focussed data services in Q1 of 2016 -- having invested about $14 billion -- partly to acquire 800MHz spectrum in 10 circles and higher-bandwidth spectrum of 2300MHz/1800MHz in 22 circles. It expects industry revenue to grow by low single-digits (2015: 9%), driven solely by data services as voice matures and subscriber growth slows.
-"Data's contribution to revenue will rise to around 25-27% (2015: 18-20%) as data traffic will double -- aided by the proliferation of cheaper smartphones, lower data tariffs and improving content availability,-" it said.
