Jio to Gain Market Share from Incumbent Telecom Operators

As per a report by India Ratings and Research, a rating agency, existing telecom operators are about to lose a part of their market share to Mukesh Ambani led Reliance Jio.

Current status of the Indian telecom industry

According to India Ratings and Research, the top players in the Indian telecom sector will continue to lose revenues and suffer from profitability due to Reliance Jio’s strategies. At the same time, a number of them will also face an increase in their debts owing to the capital spent on network and spectrum.

The agency revised its outlook on the telecom services sector to negative. It was previously stable. This is because the credit profiles of existing telecom operators deteriorated more than expected due to Reliance Jio’s free offerings and deals.

Future of data tariffs and revenues

According to India Ratings and Research, data tariffs are likely to decrease in the current financial year. The average revenue per user (ARPU) is also expected to decline despite the rise in data usage volume. Moreover, the agency claimed that data usage will increase by 35 percent to 40 percent to reach 1,250 MB in the current financial year.

India Ratings and Research expects data to have 30 percent share in the revenue of the telecom sector in the current financial year while the revenues will see an increase of about 15 percent to 20 percent. Despite a high increase in the volume of data, revenue will not have an equivalent increase. Besides, data realization may decrease by 20 percent to 30 percent.

Reason for increase in data usage

The Indian arm of the global rating agency, Fitch Ratings claimed that the reasons for the increase in data usage in India are:

  • Reliance Jio’s data-centric strategy
  • Wide availability of cheaper smartphones
  • Quick adoption of 4G

Market competition

According to CRISIL, another rating agency, due to the intense competition stimulated by the launch of Reliance Jio, telecom companies will continue to face difficulties in this financial year.

India Ratings and Research further stated that due to this competition, it is highly likely that there will be in total only four telecom companies in India. Smaller telecom operators will be acquired by the larger ones and the larger telecom companies will collaborate subject to spectrum and market share limits under the ‘Telecom Merger and Acquisition Regulations.’

About Reliance Jio

Reliance Jio is the telecom arm of Mukesh Ambani-led Reliance Industries Limited (RIL). With more than 110 crore GB of data traffic per month, Jio became the largest global network. It also registered 220 crore video and voice minutes per day, during the financial year 2016-2017.

As compared to other telecom service providers, Reliance Jio network recorded the highest average 4G data speed in March 2017. This was recorded by the Telecom Regulatory Authority of India (TRAI). Jio’s average 4G internet speed was 18.487 Mbps as of 12:30 a.m. on 1st April 2017.

Summary

According to a report by India Ratings and Research, Reliance Jio is all set to win a larger market share from existing telecom operators.

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