TAKE IT ON THE CHIN

Despite a bloody nose, India’s largest telecom operator will survive the Reliance Jio punch

Quartz india
Quartz india

Bharti Airtel’s revenue is going to take a big hit.

India’s largest telecom operator could see its revenue growth halve in the next two years, thanks to intense competition from Mukesh Ambani’s telecom “startup” Reliance Jio, according to a new report by S&P Global Ratings.

On Sept. 01, Ambani, India’s richest man, launched a massive disruption in the country’s $50-billion telecom market. His ambitious plan offers free calls across the country and the cheapest data rates in Asia’s third-largest economy through Reliance Jio. What’s more, his company is also offering all calling, messaging, and data services for free until Dec. 31 to encourage customers to switch operators.

“We expect Bharti Airtel’s operating performance to weaken because of competitive data tariffs and free voice calls,” S&P said, adding that it expects revenue growth for the company’s domestic business to decline to below 5% during the fiscal year ending March 31, 2018 and 2019, from 10% in fiscal 2016.

But S&P has left its rating on the telecom company unchanged. It said Bharti Airtel was likely to weather the storm, benefiting from its massive customer base and advantage in 4G technology, having launched the service first across several parts of the country in the last few years.

“We believe Bharti Airtel is best positioned among the incumbent players in India to compete with Reliance Industries, and it should be able to maintain its strong market position,” S&P said.

Bharti Airtel has over 250 million customers across India. In comparison, Reliance Jio has between 1.5 million and two million, according to the report.

In the days leading up to the launch, Airtel, along with other operators, had lodged a complaint with the Telecom Authority of India (TRAI), the country’s telecom regulator, saying Jio was providing full-fledged internet services to customers under its trial plan.

Meanwhile, investors, too, have been pretty harsh on telecom firms. Even as Ambani was announcing his ambitious Jio plans last week, shares of Airtel lost over 8% in value and those of Idea’s fell as much as 7%.

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