Thanks to Reliance Jio's unending kitty of discounts and offers, telecom companies will continue to incur losses in fiscal 2018, says a report by research firm Crisil.
"The price war in the Rs 1.5-trillion wireless telecom market will continue this fiscal year as well leaving bruised bottom lines," Crisil's said in a note. "Two of the top three telecom players will bleed this fiscal," it added.
The report attributes the difficulties faced by the sector to the tariff wars between Jio and incumbents but added that market leadership is crucial to the business and if anything, competition will only heat up this year. The note explained that global experiences have shown that the market leader enjoys superior profitability.
Since its launch last September, Jio has cornered 55 percent of total data consumption, while the overall data traffic has grown five times in the last one year. “A 60 percent fall in 4G data prices since the launch of Reliance Jio has resulted in muted 2 percent growth in adjusted gross revenue last fiscal year,” the report said.
This also means that the last year's trend of net losses will continue this fiscal too. For the current financial year, it sees a muted 0-5 percent revenue growth for the top telcos, as they seek to protect their subscriber base.
The picture on profitability is "grimmer" and pre-tax profit margins will drop further by 0.50-1 percent, in addition to 6 percentage point fall seen for the past fiscal year, the report concluded.