Reliance Jio Is Destroying Smaller Telcos, Revenues Hit By 24%; No Salary For Anil Ambani For A Year
The arrival of Reliance Jio has no doubt cheered the telecom users in India, as the average cost of 1 GB of data has been reduced drastically, and an avalanche of free offers and discounts have hit the market.
But, there is a side effect of this disruption as well, which most of the telecom analysts are ignoring: the survival of smaller telecom players.
As per a new report by Kotak Securities, it was found that Jio is literally destroying smaller telecom companies, as they are witnessing declining revenues at a rapid pace.
The report actually questions the survival of these smaller telcos, as Jio is adamant to dominate the market in the coming years.
Whereas, as if to confirm this development, Reliance Communication head Anil Ambani has decided not to take any salary for a year, even as banks are worried about pending debt of this company.
Will only a handful of players exist in the Indian telecom sector, in the coming days?
Jio Is Destroying Smaller Telcos – Here Is The Proof
As per the report prepared by Kotak Securities, smaller telecom players like Aircel, RCom and Sistema have suffered a loss of 50-120 basis points, in terms of revenues.
And considering that they had a smaller market share of 4-10%, this means that their revenues are down by massive 20-24%.
Hence, in layman terms, Jio has single-handedly wiped out a quarter of revenues of these companies, in a span of few months (between September and March)
Now, larger companies like Airtel too have suffered heavy loss.
In fact, Airtel suffered whooping 54% loss in revenue during 3rd Quarter of 2016, even as rating agencies are predicting a gloomy outlook for them. When a company like Airtel suffered their first consolidated loss in profit in last 4 years, then imagine what is the situation for smaller telcos.
A company like Airtel can survive, but a smaller company like RCom or Aircel may not.
No Salary For Anil Ambani This Year
As if a confirmation to this changing landscape of Indian telecom sector, RCom Chairman Anil Ambani has said that he will not take any salary this year.
The company is reeling under loans amounting to Rs 45,000 crore, and this month, there has been considerable delay in loan payments to some big lenders. Banks are worried over their debts, and the situation is pretty dismal for them.
In a statement, RCom said, “Chairman, Reliance Group, Anil D Ambani voluntarily decides to draw no salary or commission from RCom in current financial year”
Some other higher officials too have decided to take a pay cut, in view of the massive debt pile up, and loss in revenues.
We will keep you updated, as we receive more information regarding this news.