Telecom sector outlook downgraded from 'stable' to 'negative'

Rating agency said India Ratings and Research has revised its outlook on the telecommunications services sector for FY 16-17 from stable-to-negative .The ratings' agency said that the launch of Reliance Jio (RJio) will ruffle the competition and will eat into the market share of existing players. Rating agency expects the launch of Reliance Jio (RJio) to intensify competition in the telecom space, which will squeeze the market share, earnings before interest, taxes, depreciation and amortisation (EBITDA) margins and credit metrics of incumbents. The Ind-Ra said in a statement.

It also expects competition to increase as RJio contends for 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 increasing competition, leading to a decline in data average revenue per users, it said. The rating firm noticed a decline in revenue realisation of Airtel and Idea Cellular by 4.5-5.5% on a quarter-on-quarter (q-o-q) basis.