Telcos' revenues may slip 7% post RJio offer, demonetisation: ICRA

The telecom sector is already reeling under a debt of Rs 4.25 trillion

Domestic rating agency Icra on Wednesday said the extension of free services by RJio for three more months will aggravate pains for existing operators hit by demonetisation and lead to a revenue dip of up to 7 per cent in next two quarters.

"At a time when the industry is already facing pressures on the operating metrics, owing to heightened competition, the extension of free services by RJio is expected to further push down the realisations in both the voice and data segments," its associate head for corporate ratings Harsh Jagnani said.

"The impact is expected to be exacerbated by demonetisation of the higher denomination currency, which can lead to revenue loss of the telcos, especially in the pre-paid segment," he added.

Stating that the sector is already reeling under a Rs 4.25 trillion debt, it said RJio's extension has "added to the industry's woes" and coupled with the demonetisation exercise, will lead to a revenue dip of 5-7 per cent.

Mukesh Ambani-led RJio, launched in September, extended the free services till March 2017, after announcing not to charge voice telephony at all (which is the revenue mainstay for entrenched operators) and depend only on the data for revenues.

The government's surprise move to scrap Rs 500 and Rs 1,000 notes on November 8, has severely impacted consumption and led to a rash of growth estimate cuts by economists.

Icra said RJio's aim is to target high average revenue per user (ARPU) subscribers and feels that the industry would migrate from the revenue per minute or the average revenue per megabyte approach to ARPU-based approach.

The new entrant will also be helped by other factors like a big bang launch, a fresh network which will give better service and better device ecosystem.