New Delhi, Feb 27: As Reliance Jio prepares for the launch of 4G telecom services in India, analysts feel the volumes and margins of incumbants will come under stress, even as the available spectrum will see consolidation as the company moves to a position of strength in the area. “The launch of Reliance Jio Infocomm will intensify competition which will squeeze the market share, EBITDA (earnings before interest, tax, depreciation and amortisation) margins and credit metrics of incumbents,” credit ratings agency India Ratings and Research said.
A wholly-owned subsidiary of the Fitch Group, the agency has also revised its outlook for the country’s telecommunications services sector for 2016-17 — from stable to stable-to-negative. India Ratings also expects the intensity of competition to increase as Reliance Jio also contends for a market share out of the existing pie of subscribers being serviced by incumbent operators, besides adding more to the network. (Also Read: Reliance Jio to launch 4G services this year says Mukesh Ambani)
“Data market will be first to face the impact of increased competition resulting in a decline in data average revenue per users,” the agency warned. Earlier this week, Reliance Industries chairman Mukesh Ambani said Jio — already being used by the company’s employees — will be ready for commercially launch in the second half of 2016 to offer high-speed mobile internet and voice services to 80 percent of Indians.
Since this will need a lot of spectrum, Credit Suisse said in its analysus that the company was moving from a weakest to the strongest position in the area. The analysis comes at a time when Anil Ambani’s Reliance Communications is moving towards gaining control over close to 20 percent of the total spectrum with private companies in India along with plans for a airwaves sharing pact with Jio in all 22 circles in the 800 MHz band.
“For first four years after acquiring spectrum in 2,300 MHz band in 2010, Reliance Jio’s spectrum holding was seen as a significant weakness in their strategy — relegating it to a pure-play data operator,” the Credit Suisse analysis said. “However, over the last 24 months, Reliance Jio has swiftly acquired large amounts of spectrum in 1,800 MHz and 850 MHz bands through auctions and sharing and trading deals with Reliance Communications,” it said.
“As a result, we see Reliance Jio as increasingly moving towards probably the best spectrum holdings across private operators in India,” it added. “Currently, being the only operator with a pan-India sub-1GHz liberalised spectrum and 30 percent share of all the liberalized spectrum, Reliance Jio’s spectrum portfolio has become now quite enviable.”