With ₹35000 crore debt, can telcos afford a brutal price war?
- Telcos have a combined debt of ₹35,000 crore
- Cannot afford a brutal price war
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The spectre of another price war is back in the telecom space, with industry insiders and analysts predicting Bharti Airtel, Vodafone and Idea Cellular to slash their rates to respond to the enticing tariffs that Reliance Jio Infocomm is offering, said a report in The Economic Times.
Industry executives expect the Mukesh Ambani-controlled company to disrupt the market with cheap prices and its pan-India network. They see this compelling the incumbents to announce tariff cuts over the next few weeks to ring-fence customers in a market that is highly price-sensitive.
Ambani has set a target of signing up 100 million subscribers in the shortest possible time.This intensifying competition is good news for consumers, but not for an industry that is sitting on about Rs 35,000 crore of debt. With fresh airwave auctions coming up, that burden is likely to pile up further.
A margin-denting price war at this time will hamper the recovery the industry has been witnessing, a worry that analysts have been talking about ever since RIL announced its plan to enter the telecom space with Jio. "Jio's launch has been one of the key worries we have had for the last couple of years, and this is turning out to be quite negative. We continue to stay cautious," Credit Suisse said. The brokerage expects more action in future, as it says, Jio hasn't revealed all its cards yet. Jio could launch a new set of tariffs around January, it predicted.
Airtel issued a statement welcoming Jio's formal entry into the sector and said it would fulfil all of its regulatory obligations as it has done so far. The company was subtly responding to a remark made by Ambani at the Reliance AGM in the morning, where he said the onus was on the incumbent operators for providing interconnect to Jio.
