Further decline in data tariffs may impact operators’ profitability and sustainability, says Prashant Singhal, Global Communication
Mumbai : Consumers could see their monthly mobile bills coming down significantly as Reliance Jio’s (RJio) disruptive entry into the Indian telecom market with rock-bottom prices is expected to unleash a new round of price war in the industry, analysts on Thursday said.
RJio, which has been testing its network over the last few weeks, on Thursday said its users will not have to pay for voice calls and roaming, while data will be charged as low as one-tenth of the prevailing rates. At present, nearly 70 per cent of industry’s revenue comes from voice, reports PTI.
“This announcement will unleash a price war among telcos, and users can expect cost of data (not voice) going down in the range of 25–35 per cent,” Greyhound Research Chief Analyst and CEO, Sanchit Gogia told PTI.
He added this will further add bottomline pressures on the already struggling telcos that will ultimately be forced to consolidate.
RJio in its test phase has garnered over 1.5 million users and aims to take the number to 100 million “in the shortest possible time”. During his speech at the 42nd AGM of Reliance Industries, Mukesh Ambani said, “Indians can all do ‘Data-giri’, which is an opportunity for every Indian to do unlimited good things, with unlimited data.”
CRISIL Research said that by opting for Reliance Jio plans, mid-to-high end subscribers could see their average monthly mobile bills coming down by 50-60 per cent.
Tanu Sharma, Associate Director – Large Corporates, India Ratings & Research said that data tariffs are bound to see a “major correction” due to RJio’s launch while the benefits from higher data volumes and user growth will be back-ended.
Sharma said that RJio’s free voice calling and SMS services and data bundle offer, could hurt the voice tariffs of existing operators, who would need to respond with similar offers in a bid to protect their turf.
“The debt profile of operators will deteriorate in 2016-17 as they may incur high capex on network expansion andacquisition of additional spectrum to compete with RJio,” Sharma added. Stating that the telecom sector is currently reeling under financial stress, high debt burden and slowdown in revenue growth, Prashant Singhal, Global Telecommunication Leader, EY noted that, “Further decline in data tariffs may impact operators’ profitability and sustainability”.
Motilal Oswal Securities’ Head (Retail Research) Dharmesh Kant termed RJio’s tariff as a “knockout punch” but said the big concern arises on timelines of achieving operating break-even point.
Industry will wait-and-watch for few quarters on how RJio’s operations develop, and operator manages network and operations for better customer experience, Gartner Research Director Amresh Nandan added.