Telcos
will continue to face difficulties in fiscal 2018 as well and two of the top
three telcos are set to “bleed” due to intense competition triggered after the
launch of Reliance Jio, a report said today.
“The
price war in the Rs. 1.5 lakh crore wireless telecom market will
continue this fiscal year as well leaving bruised bottom lines,” Crisil’s said
in a note.
“Two of
the top three telecom players will bleed this fiscal,” it added.
It
attributed the difficulties faced by the sector to the price war for data
subscribers, but added market leadership is crucial to the business and if
anything, competition will only heat up this year.
The note
explained that global experiences have shown that the market leader enjoys
superior profitability.
The
report said two of the top three telcos will end last fiscal year with net
losses, and this trend is expected to continue in the current fiscal year as
well.
Since
its launch last September offering free services for almost six months, Jio is
estimated to have cornered 55 per cent of total data consumption, while the
overall data traffic has grown five times in the last one year, it said.
“A 60
per cent fall in 4G data prices since launch of Jio has resulted in muted 2 per
cent growth in adjusted gross revenue last fiscal year,” the report said.
For the
current financial year, it sees a muted 0-5 per cent revenue growth for the top
telcos, as they seek to protect their subscriber base, it said.
It said
the picture on profitability is “grimmer” and pre-tax profit margins will drop
further by 0.50-1 per cent, in addition to 6 percentage point fall seen for the
past fiscal year.
It said
the proposed merger between the second and the third biggest telcos—Vodafone
and Idea Cellular—is aimed at strengthening market position if not leadership,
alongside lowering investment needs and costs.
Agencies
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