Indian telecom industry's revenue will plunge and hit the ground this fiscal year due to rigid competition and cut-throat pricing, according to the S&P Global Research Report. It also states that the industry revenue will be dominated by the top three companies by at least 75-85 percent.
Telecom companies profit will sink by at least 5 to 10 percent, while the competition will get more intense when Reliance Jio launches its new smartphone at zero price in an attempt to lead the rat race. The decline, however, will be sharper for the smaller competitors like Aircel, Tata - teleservices and Reliance Communications, according to the report's findings.
Big competitors like Bharti Airtel, Idea-Vodafone will see the lower end of the range getting lower, making the the future growth outlook of the telecom industry gloomier.
Competition in the sector was spurred by the Jio drive which took a lead in the sphere through popular strategies like providing the Jio network initially for free and then taking minimal charges. Later, a big blow came after Mukesh Ambani's Reliance Jio Infocomm Ltd announced it would produce free smartphones.
Jio smartphones will not just be a threat to its competitors but also to smartphone makers, who will be seen struggling with the pricing pressure.
Such bullish moves will allow Reliance Jio to receive more subscriptions and also extend its rural penetration.
Jio's competitor Bharti Airtel Ltd also said that Jio was tyring to create a monopoly by removing charges they pay for cross operator calls, BloombergQuint reported.
However, the S&P Global research report also found that about 75 to 85 percent of the telecom industry revenue will be dominated by Idea – Vodafone, Bharti Airtel and Reliance Jio Infocomm this year.
It will be interesting to see if Reliance Jio leads the pack in future with its launch of "India ka Smartphone."
As per the Telecom Regulatory Authority of India (TRAI), the Reliance Jio Infocomm has managed to top the list in 4G network speed in April with an all – time high download speed of 19.12 megabit per second (Mbps).
What will the government-owned telecom companies do?
According to the S&P report, the top three telecom companies -- Bharti-Airtel, Idea-Vodafone and Reliance Jio -- are expected to become the top tier of the telecom industry this year. If that happens, the government-owned players will be totally sidelined in the competition.
BSNL, last year after the Jio drive, however, took an initiative to come up with more competitive strategies, which included a tariff plan where the subscribers on paying Rs 149 monthly, can make all the local and national calls for free.
More of such strategies or newer strategies to boost demand will be required to hold up with the competition and retain subscribers.
But the question remains, whether the government led telecom companies -- Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd -- will be able to withstand the fight or succumb to the competition.
