Credit rating firm India Ratings on Thursday revised its outlook on Indian telecom sector from stable to "stable-to-negative" for the current fiscal.
"India Ratings and Research (Ind-Ra) has revised its outlook on the telecommunications services sector for FY 2016-17 to stable-to-negative from stable.
"The rating agency expects the launch of Reliance Jio to intensify competition in the telecom space, which will squeeze the market share, EBITDA margins and credit metrics of incumbents," Ind-Ra said in a statement.
It also expects competition to increase as RJio contends with market share out of the existing pie of subscribers which are being serviced by incumbent operators.
As a result, data market will be first to face the impact of increased competition, resulting in decline in data average revenue per users, it said.
The rating firm noticed decline in revenue realisation of Airtel and Idea Cellular by 4.5-5.5% on quarter-on-quarter basis.
"Ind-Ra believes this price decline was in anticipation of the RJio launch, and therefore expects a further softening of data tariffs in the Financial year 2016-17," the statement said.
It expects voice revenue in the sector to moderate during the current financial year on stagnant minutes of usage and further competition in call realisations.
Furthermore, the agency expects data revenue to remain stagnant on account of 30-40% decline in data realisations per megabyte in the current fiscal, driven by RJio's launch.
"The operators' debt profile will deteriorate in FY 2016-17 as the agency expects them to incur high capex on network expansion and acquisition of additional spectrum through trading, largely to compete with RJio," it said.
Spectrum auction will add to the pressure for telecom operators as it will further impact their debt profile.
"Highly competitive biddings to acquire spectrum in upcoming auctions, thereby impacting operators' debt profiles could lead to Ind-Ra revising the sector outlook to negative," the firm said.
