Other telcos take a beating on D-Street

MUMBAI: It was a flat day for stock markets on Thursday but telecom companies took a beating, with a 6-10% dip in share value wiping off more than Rs 13,000 crore

MUMBAI: It was a flat day for stock markets on Thursday but telecom companies took a beating, with a 6-10% dip in share value wiping off more than Rs 13,000 crore of their market cap, after Reliance Industries unwrapped its much-awaited Jio mobile network.

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Idea Cellular shares plunged 10.50% to Rs 83.70, Anil Ambani’s Reliance Communications tumbled 8.8% to Rs 49.15 and Bharti Airtel’s slipped 6.4% to Rs 310.70.

“Prima facie Reliance Jio’s pricing is not just highly competitive but also challenges prevalent tariff structures as Jio will offer free voice calling and SMS services bundled with the data tariff,” said Tanu Sharma, associate director, India Ratings and Research.

“This could hurt voice tariffs and average revenue per user of existing operators as well as push them to match the pricing, in a bid to protect their market share.”

Earlier this week, Airtel announced a significant cut in its prepaid data tariff in a move widely attributed to Jio’s anticipated entry.

Crisil expects EBITDA (earnings before interest, taxes, depreciation and amortisation) margins in the telecom industry to drop 250-300 basis points in 2016-17 and remain under pressure in the next fiscal as well.

“Reliance Jio’s price aggression is expected to exacerbate pressure on both revenue growth and profitability of existing operators,” the rating firm said.