Data tariff may drop 20 percent with Reliance Jio's entry: Fitch

The entry of Reliance Jio in the telecom space in the first half of 2015 will intensify competition in the data space and may cause data tariff to decline by at least 20 percent, Fitch Ratings said here Tuesday.

"Jio's planned entry in 1H15 will intensify competition in the data segment, and may cause data tariff to decline by at least 20 percent. Jio, with spectrum assets in 2,300 MHz (long-term evolution bandwidth) and 1800 MHz (in 14 zones), will focus largely on data," the report '2015 Outlook: Indian Telecommunications Services' by Fitch Ratings said.

"It 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," Fitch said.

It further added that six telecom operators will emerge from the ongoing industry shake-out, as 10-12 operators is unsustainable.

"Top four telcos - Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications - will increase revenue market share to around 83 percent of the $30 billion industry as they boost voice tariff realisations and gain data market scale," the report said.

It expects that the credit profile of the top four Indian telcos will remain intact due to a gradual rise in voice tariff.

"This derives from ongoing industry consolidation despite a likely fall in data tariffs due to the entry of Reliance Jio. The outlook for nationally owned telcos and weaker unprofitable telcos is negative - given their unviable business models, high cost structure, weak spectrum assets and large capex requirements," Fitch Ratings said.

It cautioned that the sector outlook would also turn negative if government auctions lower-than-expected spectrum quantity in 2015 which leads to aggressive bidding by incumbents, whose licences expire during 2015-2016.