Although the details were not known, the latest offer by Jio was at least 20 per cent cheaper than the unlimited plans announced by incumbents, analysts said.
“Falling voice and data realisations for incumbent operators are expected to continue in the March quarter and stabilise thereon,” said Manoj Behera of Phillip Capital.
Behera added, “Any improvement is expected to come only by the second half of 2017-18 and will depend on how the incumbents respond to the offers.”
Jio’s free offer last September forced Airtel to announce unlimited plans at Rs 549, down from Rs 749 a few quarters ago.
Revenues of Airtel and Idea have been hit by falling realisation and analysts said margins would be affected by higher costs. Idea’s operating profit margin, now 25 per cent, could decline by 100-150 basis points, they added.
Subscriber churn is also expected to rise after Jio’s paid plans start on April 1. The monthly churn levels for Idea and Airtel are four-six per cent. Since Jio’s launch, most users have two SIM cards. Airtel and Idea have seen a fall in data use as subscribers switched to the free Jio service.
Voice quality on the Jio network was responsible for the dual SIM phenomenon, analysts said, adding this could change as Jio improved its grid. India Ratings recently pointed out Jio’s ability to retain market share would be driven by pricing and user experience, coupled with the success of voice over LTE technology.
The other area of interest for investors is the impact on Reliance Industries. At an average revenue per user (ARPU) of Rs 157, revenue market share of 19 per cent and user base of 170 million, Idea is making losses. Airtel’s blended ARPU is Rs 172. At an ARPU of Rs 200 and a subscriber base of 100 million Jio will make losses at the operating level given operating costs of Rs 21,000-25,000 crore a year. Analysts said it would take at least a couple of years for Jio to break even.
Reliance Industries has not accounted for depreciation and other related charges in its financial reporting. It is not clear if this is will change beyond April 1, when Jio’s commercial operations are launched. An email to Reliance Industries on whether the company would account for expenses, revenue and depreciation for the telecom
division in the June quarter remained unanswered.
Reliance Industries has invested about $20 billion in the telecom
venture. After Jio’s September launch, free services were offered till March 31 through two discount schemes.
Analysts said the Airtel and Idea stocks would remain under pressure. The two stocks gained appreciably after merger talks began between Vodafone and Idea. On Tuesday, Airtel was the biggest loser among Sensex stocks, down 3.38 per cent, while Idea was down 0.4 per cent.