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Data tariffs may fall 20% with Reliance Jio’s entry: Fitch Report

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The entry of Reliance Jio Infocomm in the telecom space would intensify competition and might bring data tariffs down by at least 20 per cent.

“The likely entry of Reliance Jio, which is a part of Reliance Industries Ltd. in 1H15 will intensify competition in the data segment, and may cause data tariffs to decline by at least 20 per cent,” Fitch said in its 2015 outlook for Indian telecommunications services.

Reliance Industries had announced that it would launch commercial 4G telecom service of RJio in 2015 entailing investment of Rs. 70,000 crore.

Fitch said Jio will focus largely on data and may have a limited impact on the incumbents’ core voice business, given a weak “voice-over-LTE” technology ecosystem and lack of affordable 4G-compatible handsets in India.

“We do not foresee a re-run of the tariff wars of 2009-2013, which led to a severe decline in industry tariffs,” Fitch said.

“The top four telcos will generate a minimal free cash flow (FCF) margin due to higher CapEx and flat EBITDA; the 2015 industry CapEx/revenue ratio could rise as fast-growing data traffic requires supporting investment,” it added.

“Fitch expects Bharti’s 2015 Funds Flow (FFO)-adjusted net leverage to improve to 2.2×-2.3x (FY14: 2.5x, excluding unpaid spectrum costs), thanks to an equity issue of USD350m by its tower subsidiary Bharti Infratel and its ability to generate USD600m-700m in annual FCF. Leverage could also improve due to Bharti’s plan to monetise its African towers during 2015-2016, which could help raise around USD 2Bn,” according to the report.

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I am Sherly, living in the city of Alappuzha, which known as the 'Venice of the East'.
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