According to global financial services company, Credit Suisse, Reliance Jio Infocomm Limited?s (RJIL) foray into 4G space will prove to be disruptive for the Indian telecom sector.
The company expects an increase in competitive intensity in the industry once RJIL launches its services in the next few quarters. Credit Suisse states that the capacity addition to the industry with RJIL?s entry will be higher than all the new networks put together between 2009 and 2010.
Further, the company downgraded the country?s leading operator by revenue and subscriber, Bharti Airtel to underperform citing increased competition once RJIL starts offering 4G voice and data services. The company backs its claim by stating that in 2009-10 due to increased competition in the industry, Bharti Airtel?s earnings before interest, tax, depreciation and amortisation (EBITDA) stayed flat for three years before recovering in 2014.
According to financial services firm, between 2008 and 2010 ? the Indian telecom industry witnessed reduction in tariffs owing to entry of new players, which impacted the revenue and profits of the existing players, including those of Bharti Airtel. However, Credit Suisse underlines that over the past three quarters with competitions easing out, operators particularly the top three leading players have cut down on discounts and increased call rates, thus improving their financials.
Going forward, Credit Suisse has lowered its estimates on Bharti Airtel?s pre-tax numbers for financial year 2016-17 by 10-15 per cent, until any tariff increases come through. It has also termed as optimistic the current consensus estimates that Bharti and the second leading player, Idea Cellular?s EBITDA will grow 10-15 per cent annually over the next three years.
