Reliance Jio’s Paid Services May Not Expand Indian Telecom’s Total Revenue
Two brokerage houses see a turnaround for the telecom sector only in FY19.
Reliance Jio Infocomm Ltd.'s paid services may not necessarily improve the telecom sector's total revenue, said HSBC Global Research. Fierce competition among the incumbents and Reliance Jio will ensure that pricing pressure continues, added the brokerage house in a sectoral report.
The price war will continue till Reliance Jio doesn't have 10-20 crore paying subscribers added HSBC. The latest telecom operator is also expected to launch a cheap version of 4G enabled phones to increase penetration, delaying any sort of stable recovery till at least the second quarter of the current financial year, by when a substantial chunk of subscribers may have transitioned to bundled services which include voice and data services.
Bharti Airtel
- Rating: Buy
- Target Price: Rs 415
- Bullish on Bharti Airtel's data growth and improved balance sheet.
- Using existing 3G spectrum for 4G, a key positive for the company.
Idea Cellular
- Rating: Maintain Reduce
- Target Price: Rs 58
- Reduced rating on stretched balance sheet and lack of robust 4G spectrum, negative for the company.
- Not moved by the merger with Vodafone India as it will take another 18 months for the merger to fructify. It also sees the synergies to be more in the medium-term.
- Ability to benefit from fiber sharing could could reduce the pressure on its balance sheet.
CLSA On Reliance Jio
International brokerage house CLSA also expects Reliance Jio to launch its affordable 4G smart phone within the second quarter of the current financial year, and ramp up its broadband play.
CLSA expects parent Reliance Industries Ltd.’s Chairman Mukesh Ambani to announce some of these launches at the Annual General Meeting. It also expects announcements on future projects and future cash use.
Revenue fall may intensify at 7 percent in the current financial year, with Jio’s promotional offers and deflation in the incumbents’ average revenue per user due to retaliatory tariffs, added the brokerage house.
4G Ecosystem Taking Off
- 4G devices formed 95 percent of the smartphones shipped in 4QFY17.
- CLSA expects number of 4G devices to double over the next two financial years to 31.8 crore.
Reliance Jio: To Increase Market Size
- To expand its market beyond 4G smartphone users, Jio is likely to start its fixed broadband service.
- Post Jio’s ‘Dhan Dhana Dhan’ offer announcement in April, the company has possibly focused on plugging holes to further improve its services.
- Now, Jio’s focus should shift to monetisation, but it is to be seen if they go from the current 66 percent discount to full tariff in one go or in steps.