Global rating agency, Fitch Ratings is of the view that the entry of Reliance Jio Infocomm Limited (RJIL) in the Indian telecom market will lead to a reduction of around 20 per cent in data tariffs. This will be mainly due to the increase in competition in the telecom space with RJIL launching its 4G services on a pan-India level in 2015.
Due to the RJIL?s main focus on data services, the entry of the company however will not affect the voice business of the incumbents in the industry. This would also happen because the ecosystem for voice over long term evolution (LTE) technology has not fully developed in the country along with the absence of affordable 4G mobile handsets in the market.
Fitch Ratings further believes that the future growth of telecom industry will be driven by data services. Meanwhile, the agency expects that the combined market share of Bharti Airtel, Reliance Communications, Vodafone India and Idea Cellular will increase from the present 79 per cent to around 83 per cent by 2015. Further, it believes that the operating earnings before interest, taxes, depreciation and amortisation (EBITDA) margins of the four operators will not change as the decline in data tariffs will be compensated by a gradual rise in voice tariffs. Therefore, these telecom service providers will generate a minimal free cash flow margin due to higher capital expenditure as fast-growing data traffic requires supporting investment along with a flat EBITDA in 2015.
