Jio burns ₹13000 crore hole in Idea, Bharti and RCOM's marketcap
- Reliance Jio's launch had a disastrous impact on the market-cap of Bharti Airtel, Idea Cellular and Reliance Communications
- On Thursday ₹13000 crores of investor wealth was wiped out on the bourses
FollowReliance Jio's aggressive plans for its mobile services launch left a $2-billion (over ₹13,000-crore) hole in the pockets of shareholders of its listed peers — Bharti Airtel, Idea Cellular and Reliance Communications said a report in the Times of India.
Sunil Mittal-led Bharti was the biggest loser with its market capitalisation dipping over ₹8500 crore to ₹1.3 lakh crore, followed by Kumar Mangalam Birla-led Idea's more than Rs 3,500-crore loss to an m-cap of about ₹33,700 crore. In percentage terms, while the Idea stock crashed over 10% to ₹84, RCOM lost nearly 9% to ₹49 and the Bharti stock tanked more than 6% to ₹311. Only MTNL stock closed higher, which was up over 1% at ₹22 at close of Thursday's session on the BSE.
Dalal Street investors fear that Mukesh Ambani-led Reliance Jio's plans would soon start affecting finances of incumbent telecom services providers, including the unlisted Vodafone India. If the incumbents do not cut tariffs to match Jio's levels, customers may move to other networks offering lower rates, said the director of an investment advisory firm.
According to ratings major Crisil, Reliance Jio's price aggression is expected to increase pressure on both revenue growth and profitability of existing telcos. "Operators will not only be forced to take a relook at their tariff structures and customer retention strategy but may also be forced to bid more aggressively in the forthcoming spectrum auctions, especially in high revenue-generating circles where they have limited 'capacity and spectrum' to offer 4G services," it said in a note.
"Additionally, in the near term, data traffic would migrate from incumbent operators' networks to the 'free' Reliance Jio network. We expect ebitda (earnings before interest, taxes, depreciation and amortisation) margins for the industry to shrink by 250-300 basis points (100 basis points = 1 percentage point) in 2016-17 and remain under pressure in the next fiscal as well," it added.
The day's session also witnessed a slide in the RIL stock, which closed nearly 3% lower at ₹1,029, mainly because of investors' fears about the execution risks emanating from Reliance Jio's aggressive launch plans and also if such a stance will lead to losses in the initial years.
Brokers are expecting the RIL stock to remain under pressure in the short to medium term, with investors closely monitoring the rollout and effectiveness of Reliance Jio and also the response from its competitors to the emerging scenario in the telecom space.
