Speed Dialing Down Stocks

Incumbents in the telecom sector are seeing an upheaval in their business models — thanks to Reliance Jio. That is reflecting in their dropping stock prices By Clifford Alvares

- Clifford Alvares

TELECOM STOCKS have lately been squeezed horrifically. In just a day since the big launch from Reliance Jio, the three telecom stocks have seen Rs 17,508 crore of investor wealth evaporate.

The Idea stock dipped 10.8 per cent, while Bharti and Reliance Communications lost 9.4 and 8.9 per cent. But a next-day recovery whittled down overall shareholder loss to Rs 10,368 crore. That’s still a humungous sum. The Bharti Airtel stock recovered the most, and saw net shareholder wealth shrink by just 4.4 per cent.

Nearly all of the blame for this jaded performance can be attributed to the loss of revenue the incumbents are faced with. The free voice-calling being offered from Reliance Jio is set to hugely dent profitability of telecom operators. Observers say free voice-calling is the game-changer that would draw more subscribers to Jio, which would have a huge impact on subscriber additions.

Voice revenue comprises nearly 70 per cent of the revenues of telecoms companies in India (data cover the rest), according to analysts, — and this threatens much of telecoms profitability.

Says Deven Choksey, managing director, KR Choksey Securities: “The existing players have been thriving on the voice model for the last 22 years. Now, voice will have to be made completely free as it is across the world. The existing players will find it a huge challenge to generate revenue from only data consumption.”