Even before Reliance Jio launches its 4G services in the country, Morgan Stanley believes the pricing pressures are already pinching the incumbents thanks to a tepid growth in the data market, warranting a cut in the revenue growth forecast.
"We cut our industry revenue growth forecast by 3 percent for fiscal years 2016 to 2018 and expect the industry revenue between fiscal 2015 and 2020 to grow at a 7 percent compound annual growth rate versus 8 percent previously," the investment banker said.
The report by Morgan Stanley said despite double-digit data volume growth, data revenues are now growing in the higher single-digits.
"Earnings before interest, tax, depreciation and amortisation (EBITDA) margins are under pressure, with rising opex. Leverage is up, with companies recognizing spectrum liability," it said.
Talking about Reliance Jio, the banker said: "Jio is testing 800 MHz in 10 circles and should get spectrum in eight more circles by mid-March as per spectrum trading with RCom (Reliance Communications)."
The analysis comes at a time when Anil Ambani's Reliance Communications is moving towards gaining control over close to 20 percent of the total spectrum with private companies in India along with plans for airwaves sharing pact with Jio in all 22 circles in the 800 MHz band.
It further said Reliance Jio and RCom are the only operators having an all-India footprint sub 1 GHz. "We expect to see an Reliance Jio pan-India launch in second half of 2016, thus intensifying competition further."
Recently Reliance Industries chairman Mukesh Ambani said Jio -- already being used by the company's employees -- will be ready for commercially launch in the second half of 2016 to offer high-speed mobile internet and voice services to 80 percent of Indians.
Regarding the upcoming spectrum auction in the middle of 2016, the report said: "Currently we do not build 700 MHz, however, incumbents typically underperform six months into the auction."
