Telecom stocks fall after Reliance Jio unveils new post-paid plan

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 199 rupees and international calling at 0.50 rupees per minute on Thursday.

Shares of Idea fell as much as 8.1 per cent to their lowest since February 2011, while Airtel declined about 5.8 per cent. 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 per cent of the total subscribers, but contribute more than 20 per cent 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 per cent cut in post-paid prices will lead to an EBITDA decline of 12 per cent and 6 per cent for Idea and Airtel respectively, said Jefferies.