The largest telco by subscribers Reliance Jio will continue to eat into the user base of older rivals Vodafone Idea and Bharti Airtel, and is likely to command 45 percent of the market by March 2022, says a report.
Intense competition and elevated debt levels and continued reliance on capital infusion continue to be a drag on the sector, India Ratings said in a note Thursday.
The telecom sector has had a tumultuous time since the entry of Jio in September 2016 with a year-long freebies campaign, leading to forced mergers, erosion of profit, exits and even bankruptcies.
The market share gain for Jio, which has over 340 million subscribers already and adding 10 million users a month on average, will be at the expense of Airtel and Vodafone-Idea, it said.
Even now, the data tariffs of the deep-pocketed Jio continue to be 25-30 percent cheaper than competition, the agency said.
The aggregate gross debt of Vodafone-Idea, Bharti and Jio stood at Rs 3.9 lakh crore in FY19, implying gross leverage of over 8x for the sector, it said.
"Telcos liquidity profiles are structurally weak as free cash flows are likely to remain negative over FY20-22 due to high capex intensity which stood at Rs 1.2 lakh crore in FY19," it said, adding the operators will continue to rely on refinancing or capital infusion.
On the forthcoming 5G auctions, the agency seemed to hint that the companies may not be so interested in bidding. At the proposed reserve prices, any incremental investment in 5G technology may yield return on capital employed of only about 5 percent".
The media content space is likely to undergo a disruption, with the availability of cheaper and abundant data options under unlimited plans leading to higher content consumption on mobile devices, it said.
Disclaimer: “Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.”
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