Avoid telcos; pricing war to exert pressure on Q4 earnings: IIFL

Assessing the impact of Reliance Jio's new tariff plans on incumbent players, telecom analyst Bhavesh Gandhi of IIFL Wealth says the intense competition between the players will continue going forward too. He prefers to avoid buying telecom stocks as of now.Reliance Industries' Chairman and Managing Director Mukesh Ambani Tuesday announced that Jio's Happy New Year offer will conclude on March 31 and from April 1 new tariff plans will kick-in. While launching a loyalty bonus to the customers who join before March 31, Ambani also laid out plans to not only match the highest-selling tariff plan but also offer 20 percent more data. 

According to Gandhi, consolidation would be the operative word in the sector.

The pricing war in the sector could get even worse with Jio tariff offer coming to about only Rs 10 per GB of data, which would be lower than the market rate. This will exert pressure on the fourth quarter as well as early FY18 earnings of incumbents.

Expectations of EBITDA breakeven for Reliance Jio in the first quarter of FY18 is farfetched, says Gandhi. "For the sector, it is more a game of increasing customer base or customer market share, which Reliance Jio is likely to pursue aggressively," he says.(Disclosure: Reliance Jio is part of Reliance Industries which owns Network18 Media and moneycontrol.com)