Reliance Jio’s entry into the Indian 4G market will put downwards pressure on ARPU, with blended tariffs falling 5-6 per cent next year, Fitch Ratings forecasts.
“Jio’s entry will arrest the rise in data ARPU despite rising data usage, and voice ARPU will continue to fall due to cannibalisation by data,” Fitch said in a report.
Jio was expected to start 4G service next month, but its long-anticipated pan-India launch has been delayed until next year, with the company saying an official launch date hasn’t been set.
Fitch expects increased competition, higher capex and debt-funded M&A to put pressure on the credit profiles of the country’s top four mobile operators, which account for 71 per cent of mobile connections.
Service revenue next year is forecast to grow by a low single-digit figure, down from an estimated 9 per cent this year. The growth will be driven solely by data services as voice matures and subscriber growth slows. Data’s contribution to total service revenue will rise to around 25-27 per cent, from 18-20 per cent this year, as data traffic is expected to double.
The top four operators’ average operating EBITDA margin will narrow by 1-2 percentage points (the margin was forecast at 35 per cent this year) due to pricing pressure on the higher-margin data services and a rise in marketing spend as data competition intensifies.
Fitch said earlier in the month that the major players are likely to look for acquisitions as they require more spectrum to support their fast-growing 3G/4G services, while smaller, loss-making firms will be willing sellers due to rising competition and the regulator’s move to relax spectrum trading and sharing rules.
Five to six operators will emerge from the pending shake-out, it said. The top four — Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications — are likely to raise their revenue market share to 80 per cent from 73 per cent last year.
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