DNA Money Edit: How long before the Jio storm settles?

Telecom sector continues to be in the doldrums. It has not been able to recover from the shock which came with the entry of the new player Reliance Jio in late 2016. The tremors are still being felt. For a single quarter, Vodafone Idea posted a loss of about Rs 5,005 crore, Airtel posted a 72% decline in profits and Reliance Communications knocked the doors of National Company Law Tribunal for insolvency, second telecom firm to do so in recent times.

While Jio continues to add new users, incumbents including Vodafone Idea and Airtel lost 3.5 million and 6 million subscribers in the third quarter, respectively, as they look to weed out low Arpu (average revenue per user) customers. But analysts say until mobile tariffs are raised, it will be difficult for incumbents to sustain in long term. Once Jio achieves revenue market share of around 30 % by mid-2019, it would have less incentive to keep tariffs low. Bharti has a revenue market share of around 32-33%, while the market share of largest telecom operator Vodafone-Idea is likely to fall below 30% in 2019.

With deteriorating financials, the capacity of players to invest in capex has also come down. Both Airtel and Vodafone are looking to raise funds in immediate future. A recent report by India Ratings and Research has maintained a negative outlook on the telecom sector for FY20.

The competition remains intense and rising data consumption is the only silver lining. Though, some green shoots may appear in a few quarters.