Jio launch disruptive: India Ratings

Data tariffs are bound to see a major correction due to the disruptive launch of Reliance Jio Infocomm (RJio) while the benefits from higher data volumes as well as subscriber growth will be back-ended, says Tanu Sharma, associate director – Large Corporates, India Ratings & Research.

The existing top telcos (Bharti Airtel, Vodafone and Idea) have already undertaken pre-emptive price cuts by offering higher data volumes for similar pricing to retain their customers.

R Jio, which is officially launching services from 5 September 2016, has announced it will offer data services free for four months, after which it will offer 10 tariff plans starting at Rs19 a day for occasional users, Rs149 a month for low data users and Rs4,999 a month for heavy data users.

The company will also offer free voice calling and SMS services bundled with the data tariff, which could hurt the voice tariffs of existing operators as well as they would need to come up with similar offers in a bid to protect their market share.

Ind-Ra believes that RJio launch will accelerate 4G adoption in India helped by its attractive tariffs, low cost handset pricing, perceived superior quality of services driven by its huge investment in network.

RJio may look to disrupt some of the prominent geographies of existing operators, leading to a re-distribution of the market share which is concentrated among the top three operators, in FY17.

The operators' debt profile will deteriorate in FY17 as the agency expects them to incur high capex on network expansion and acquisition of additional spectrum to compete with Jio.