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The intense price war in the telecom sector will result in gross revenues of the top three incumbents — Bharti Airtel, Idea Cellular and Vodafone India — plunging by 14-16 per cent this fiscal.
The operating profit of the incumbents is estimated to halve between FY16 and FY19 as the price war continues, a study by rating agency Crisil said.
Consequently, the industry’s adjusted gross revenues (AGR) could decline a further 6-8 per cent this fiscal owing to continued deterioration in realisation from data sales.
However, volume growth in data, expected at about 45 per cent (compared with a four-fold jump in fiscal 2018), will limit the damage, according to the study.
“The intense price war in telecom, which started in September 2016 with the entry of Reliance Jio Infocomm (RJio), is showing no signs of abating. If anything, it has become even more brutal, and the pain is expected to continue this fiscal,” it added.
Even after RJio began charging for its services, the industry’s realisation has been declining owing to continued downward revision in tariffs especially for high-end data users. The average realisation per MB (ARMB) plummeted from about 23 paise in fiscal 2016 to a mere 1.6 paise in fiscal 2018.
“We see ARMB falling further to 1.15-1.20 paise by end-fiscal 2019 because of the data pricing war led by RJio, which has been a net gainer following a cut in interconnect usage charges (IUC).
“The situation is expected to improve only after fiscal 2020, following completion of consolidation (Idea Cellular and Vodafone India) for the industry,” it added.
The reduction in IUC by Telecom Regulatory Authority of India (TRAI) should have lowered access charges payout. However, the impact was just the opposite.
Free calling plans by telecom operators pushed up sharply the minutes of use, which, in fact, increased the IUC payout. The one bright spot in the wireless space is the exponential growth in data traffic. In fiscal 2018, the overall data traffic grew four-fold, the study said.
Availability of cheap 4G-enabled devices along with all-time low data tariffs are driving the shift in subscriber mix towards 4G. Telcos are increasingly entering into content partnerships with over-the-top (OTT) players in order to drive data usage.
There is also a paradigm shift in data offering that the industry has undergone after the entry of RJio - from GBs per month to GBs per day, it added.
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