Shares of Indian telecom services providers fell sharply on Friday after Reliance Jio Infocomm Ltd unveiled a new post-paid plan as it takes on bigger rivals such as Bharti Airtel Ltd and Idea Cellular Ltd.
Jio, the telecom arm of Reliance Industries Ltd, introduced an unlimited domestic post-paid plan for Rs 199 and international calling at 50 paise per minute on Thursday.
Shares of Idea Cellular fell as much as 8.1 percent to their lowest since February 2011, while Bharti Airtel declined about 5.8 percent.
Reliance Jio’s entry into the telecoms sector has set off a brutal price war among operators as they drastically cut prices to compete with Jio’s bottomed-out plans.
For the top three big telecom operators in India, post-paid users make up only 7 percent of the total subscribers, but contribute more than 20 percent to their revenues, said Jefferies.
Airtel and Idea are expected to launch new plans in response to Jio’s offer and thus see a further decline in their average revenue per user, Jefferies added.
Any 10 percent cut in post-paid prices will lead to an EBITDA decline of 12 percent and 6 percent for Idea and Airtel respectively, said Jefferies.
(Disclosure - Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)
Updated Date: May 11, 2018 12:18 PM