Analysts expect Reliance Jio's expansion plans will put further pressure on Bharti Airtel's margins.
A heightened competition in telecom industry, which intensified after Jio's launch in September last year, is impacting incumbent telecom operators. Jio has impacted financials of India's biggest telecom operator Bharti Airtel, which reported a fall of 69 per cent in its March quarter net profit. Bharti Airtel's net profit came on at Rs 471 crore against estimate of Rs 528 crore. Without naming Reliance Jio, Airtel's management said, "Mobile market remains turbulent in the current quarter as well due to free offering by a new operator." Reliance Jio, owned by India's richest man Mukesh Ambani, launched its free voice and 4G data services in September 2016 and had extended them till March 31, 2017, sparking a price war which forced incumbent telecom players to slash their data and voice call prices to retain customers. From April 1, Jio began to charge customers under its Jio Prime service.
Meanwhile, analysts expect Reliance Jio's expansion plans will put further pressure on Bharti Airtel's margins. Domestic brokerage Edelweiss in a research report said, "With Reliance Jio aspiring to garner meaningful subscriber and volume share, we anticipate sustained pressure on realisation, which will be only partially offset by volume growth."
In the recently concluded quarter, Bharti Airtel's margins of India mobile business dipped 150 basis points sequentially to 36.9 per cent, Edelweiss said.
"We expect sustained competitive intensity to accelerate consolidation in the industry with emergence of fewer, but stronger players," Edelweiss said. Edelweiss has a hold rating on Bharti AIrtel's share for target price of Rs 340.
Meanwhile, India Ratings in a report said, Reliance Jio is likely to gain market share from existing telecom operators. "The existing telcos would lose market share to RJio and suffer from poor profitability while their debt burden will increase due to spectrum and network related capex," it said.
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