 "Jio to gain less than 2% revenue market share")
Fitch Ratings expects credit profiles of Indian telecom operators to weaken amid intense competition and high capex requirements in 2017.
The ratings agency said pricing power could be eroded as incumbents retaliate against new entrant Reliance Jio's cheaper data tariffs and free voice and text. It, however, said that Reliance Jio is expected to gain less than a 2 per cent revenue market share in 2017 but to act a major price-disruptor to the sector.
The top-four's — Bharti Airtel, Vodafone India, Idea Cellular and Rcom/Aircel — revenue market share will rise to around 84 per cent (2016: 79 per cent) as they gain market share from smaller telcos.
Fitch Ratings said industry revenue growth could slow to the mid-single-digits due to lower data revenue growth, as data tariffs could decline by at least 15 per cent-20 per cent. The EBITDA margin of the top-four telcos could decline by 150bp-200bp (2016 average: 34%) due to lower tariffs and increased marketing spend as data competition rises.
“We believe that Rcom's plan to demerge its wireless business is credit neutral — as the demerger will take away an equal proportion of debt and EBITDA from Rcom,” it said.
Bharti Airtel’s 2017 operating EBITDAR margin could ease to 33%-34% (FY16: 35%) as Jio's high-data-allocation plan could hit its premium customer base, which accounts for the most profitability at its Indian mobile segment, Fitch Ratings said.