RJio’s plans to put an end to the paid voice call era will have a far-reaching impact on the industry’s financial metrics, with tariffs expected to tumble and operators’ debt set to rise.
Voice revenues are expected to decline on cheaper data plans, while data tariffs will be impacted by rise in usage and subscriber addition.
“We expect the launch to intensify competition, which will squeeze the market share, EBITDA margins and credit metrics of incumbents. The voice revenues are expected moderate in FY17 on stagnant minutes of usage (MoU) and further competition in call realisations,” said Tanu Sharma of India Ratings and Research.
As of March 31, 2016, Airtel had net debt of about ₹83,511 crore, while that of Idea Cellular stood at ₹40,270 crore and Reliance Communications at ₹41,362 crore. Vodafone India had a debt of ₹21,064 crore for FY15 (FY16 figures were not immediately available).
“Voice calls currently account for close to three-quarters of industry revenue. Making them free and pricing data well below existing tariffs will force incumbents to recalibrate their tariffs lower.
“We foresee operators gradually moving towards simpler all-you-can-eat plans wherein subscribers will be offered unlimited voice and fixed data access for a lump-sum amount, rather than the forest of foggy options available today,” Crisil said in a report.
Tumbling tariffsTariffs will tumble, the Crisil report further said, adding it expects average data realisations halving to about ₹0.10 per MB by 2017-18 compared with ₹0.20 per MB now.
“Jio does become a threat to the entire voice business of incumbent operators and even data to a certain extent. This washout will continue until they rationalise and align their offerings to tariffs similar to offered by Jio. The incumbents need to understand the market movements and quickly prepare for the onslaught and get the plans right to stop the customers moving away,” said Vikram Raichura, MD, VivaConnect.
Airtel and Vodafone chose to play down the event and in fact welcomed RJio’s launch on Thursday.