Friday, Dec 02, 2022

Telecom stocks crash on RJio’s lower tariff plans; over Rs 13K cr lost in m-cap

Following the announcements, share prices of Idea Cellular, Bharti Airtel and Reliance Communications fell by up to 10.5 per cent and the three companies lost an aggregate of over Rs 13,000 crore in market capitalisation on Thursday.

reliance jio, jio, reliance jio mobile, reliance jio plans, sensex, market, Telecom stock price, Telecom stock crash, technology news, business news RJio is set to attract customers but there are some concerns over break-even for the company, considering the capital investment of around Rs 1.5 lakh crore.

Announcements by Reliance Industries chairman Mukesh Ambani on Reliance Jio that included offers such as free voice calling and significantly lower data pack prices created a stir in the telecom industry.

Following the announcements, share prices of Idea Cellular, Bharti Airtel and Reliance Communications fell by up to 10.5 per cent and the three companies lost an aggregate of over Rs 13,000 crore in market capitalisation on Thursday.

While Idea Cellular was the biggest loser with a fall in its share price by 10.5 per cent on Thursday, Reliance Communications and Bharti Airtel fell 8.8 and 6.4 per cent, respectively. While Ambani is set to launch RJio services on September 5, market experts feel that the announcements will disrupt pricing within the industry.

“We believe that data tariffs are bound to see a major correction due to disruptive launch of Reliance Jio Infocomm (RJio) while the benefits from higher data volumes as well as subscriber growth will be back-ended … The company (RJio) will also offer free voice calling and SMS services bundled with the data tariff, which could hurt the voice tariffs of existing operators as well as they would need to come up with similar offers in a bid to protect their market share,” said Tanu Sharma, associate director – large corporates, India Ratings & Research.

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RJio is set to attract customers but there are some concerns over break-even for the company, considering the capital investment of around Rs 1.5 lakh crore. “Though, top line from telecom business will start trickling in however; big concern arises on timelines of achieving operating break-even point in context of tariff policy deployed,” said Dharmesh Kant head — retail research, Motilal Oswal Securities. The concerns led to a decline in share prices of Reliance Industries by 2.7 per cent on Thursday.

Some feel there is also expectation that RJio may disrupt some of the prominent geographies of existing operators, leading to a re-distribution of the market share which is concentrated among the top three operators, in FY17.

First published on: 02-09-2016 at 02:03:06 am
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