Data Plan Prices Will Drop 15% to 20% in Indian Market in 2016

Data service plan prices will fall by at least 15 percent to 20 percent when Reliance Jio enters the mobile market sometime in 2016, analysts at Fitch Ratings predict.


“We expect competition  to intensify as Reliance Jio  enters the market with likely cheaper and faster data-focussed tariff plans armed with sufficient spectrum and access to funds,” Fitch Ratings said.


“We expect blended monthly ARPU to fall by five to six percent to around Rs 160 (2015: Rs 170) due to a decline in data tariffs, which will more than offset the rise in data usage,” Fitch Ratings said.


Fitch expects industry revenue to grow by low single digits compared to the 2015 level of nine percent growth, driven solely by data services. That might be a significant prediction. Up to this point, voice revenues have driven perhaps 80 percent of mobile service provider revenues.


A shift to mobile data as the “sole” driver of growth would indeed be significant.


Mobile data will rise to around 25 percent to 27 percent of total revenue in 2016, compared to the 2015 level of 18 percent to 20 percent, on a doubling of data traffic volume.


But the biggest four mobile service providers will experience a drop in earnings before interest, taxes, depreciation and amortization (EBITDA).


EBITDA will narrow by 0.1 to 0.2 percent in 2016, partly a result of higher marketing spend and lower mobile data prices.


On the other hand, 2016 industry capex/revenue could rise to 19 percent to 20 percent, up from the  2015 level of 18 percent, in part because of investments to improve call drop performance.

But there should be upside as well. Lower prices tend to drive higher consumption of desired products. So more affordable mobile Internet access prices should lead to higher buy rates, and a higher volume of consumption as well.


Fitch Ratings said weaker unprofitable mobile operators  including Videocon, Aircel and Tata could exit the industry as they make operating losses and lack key spectrum assets and financial flexibility to invest in data networks and five to six operators emerge from the industry shake-out.


“The top-four--Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications--are likely to raise revenue market share to 80 percent,” said Fitch Ratings.


Fitch Ratings also lowered  telecom sector outlook to “negative” from “stable” for 2016.

The agency expects the 2016 credit profiles of the top-four Indian telcos to come under pressure amid tougher competition, larger capex requirements and debt funded mergers or acquisitions.
Post a Comment

Popular posts from this blog

Spectrum Fees, High Incremental Capex, Lower Value in Ecosystem Mean Historic Changes Might be Necessary

For Ting, Operating Costs are Key to Business Model

Lower FTTH Costs Improve the Business Model, But How Much?