ADVERTISEMENT

Price war in data market

Price war in data market
Highlights

With the entry of big players in the telecom sector, mobile consumers are going to be showered with data usage benefits in a big way. The impending...

Big competition set to benefit mobile users

New Delhi : With the entry of big players in the telecom sector, mobile consumers are going to be showered with data usage benefits in a big way. The impending entry of big players will increase competition in the telecom sector and pressurise credit profiles of the top-four telecom companies, Fitch Ratings, a global leader in credit ratings and research, has said.

In order to be competitive and grab chunk of the market share, the service providers are likely to offer cheaper tariffs. Fitch Ratings expects that data tariffs will fall by at least 15 percent to 20 percent as incumbents compete on price with the big player like Jio.

Cheaper tariffs will help the company 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-focused tariff plans armed with sufficient spectrum and access to funds," Fitch Ratings said.

The credit rating agency added that it expects the 2016 credit profiles of the top-four telcos – Airtel, Vodafone, Idea and Telenor -- 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 per cent 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 expects 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 800 MHz 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.

The top four telcos' average operating Ebitda margin will narrow by 100-200bps (2015: 35%) due to pricing pressure on the higher-margin data services and a rise in marketing spend as data competition rises, Fitch Ratings said.

The ratings agency said 2016 industry capex/revenue could rise to 19-20% (2015: 18%) as companies invest to meet the challenges of fast-growing data traffic and a new competitor in Jio. "We also expect telcos to invest to improve voice call quality," it added.

Show Full Article
Download The Hans India Android App or iOS App for the Latest update on your phone.
Subscribed Failed...
Subscribed Successfully...
More Stories
Top