Icra: Telcos' pricing pressure to linger on for 3 more qtrs

Despite Reliance Jio's move to start charging subscribers, ratings agency Icra today said the telecom companies will continue to face pricing pressure for three more quarters, which will put a strain on their operational metrics.
"We expect the pricing war to continue for at least two-three quarters more. The industry level debt will rise and financial performance will also be under pressure," Harsh Jagnani, agency's telecom sector head and vice-president for corporate ratings, told reporters in a concall.
On the back of these expectations, the agency affirmed its negative outlook on the sector.
Reliance Jio, which has began operations last September with free voice and 4G data has not started charging its 100 million-odd customers so far, forcing the incumbents to offer more or less matching offers to retain customers. Jio which has invested Rs 1.2 trillion so far will start charging from April 1.

The next few months will also push up the industry's debt to nearly Rs 4.50 trillion from the present Rs 4.10 trillion, he said, adding the industry will keep looking at loan refinancing and and sale of non-core assets to deleverage their bloated balance-sheets.
Jagnani said the key monitorable in the way forward will be the number of the 100 million subscribers who show willingness to stay put with Jio and pay for the services and added that many of these subscribers use the Jio as a second connection.

The picture will be clear in the first week of April on this, he said, adding various key ratios including companies' subscriber and revenue market shares will get determined on the number.

He said an effective average revenue per user of Rs 265 which RJio is targeting is bigger than the incumbents' numbers as of the December quarter.
He, however, said RJio's pricing will potentially cap the industry's ARPUs at a maximum of Rs 350, and said this can also come down over the next few quarters if the pressure on pricing materialises on further dipping in call tarrifs.
The agency feels the strong parentage of each of the operators will help telcos with their debt paying. He also said the absence of any telecom auction which results in high payouts will also help operators in the difficult times.

On the Vodafone-Idea merger announced yesterday, he said the process faces some challenges like getting regulatory approvals and high debt, but there are a host of positives in it starting with the scale benefits.