Indian 4G newcomer Reliance Jio’s offer of free voice and data for more than six months is expected to reduce mobile operators’ revenue by 5-7 per cent over the next two quarters, according to a credit rating agency.

Jio, which officially launched services in early September, recently extended its free services until the end of March as part of a special new year offer. A number of rivals have followed Jio’s lead and introduced sharp discounts to retain customers.

A report by Harsh Jagnani, associate head of corporate ratings at ICRA, referenced by the Economic Times, said: “At a time when the industry is already facing pressures on operating metrics, owing to heightened competition, the extension of free services by Reliance Jio is expected to further push down the realisations in both the voice and the data segments.”

Jagnani said the impact of Jio’s free offers is expected to be made worse by demonetisation of higher denomination notes, which will likely lead to revenue losses for operators, particularly in the prepaid segment, the Economic Times reported.

The credit rating agency said Jio will offer bundled packages in the future, which will force other operators to move away from having separate voice and data tariffs.

Fitch Ratings last month predicted Indian operators’ blended tariff will decline by 5-6 per cent.

The country’s mobile operators, whose balance sheets are already stretched, are facing additional obstacles following a spectrum auction in early October, with seven players spending $9.8 billion to expand their spectrum holdings.

Jio claims to have signed up 52 million subscribers in less than three months. Despite the free offer, the top three players have continued to add subscribers. Market leader Bharti Airtel added four million users in Q3, number two Vodafone India picked up 2.4 million and third ranked Idea Cellular added 4.3 million, according to GSMA Intelligence.

Even if Jio hits its target of 100 million customers, it will be even with fourth ranked Reliance Communications.