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Mukesh Ambani’s 45-minute speech cost Bharti, Idea Rs 13,800 crore

In what could be the worst nightmare for Bharti Airtel, the current market leader, Mukesh Ambani said Reliance Jio would offer free voice services to its active users.

Shares of telecom incumbents such as Bharti AirtelBSE -6.37 %, Idea CellularBSE -10.48 % and Reliance CommunicationsBSE -8.81 % nosedived up to 9 per cent on Thursday, as challenger Reliance Jio priced data tariff for its services at as low as Rs 50/GB, kicking off a tariff war.

Shares of Bharti Airtel slumped 8.99 per cent to hit a low of Rs 302 on BSE. Shares of Idea Cellular, the third largest telecom subscriber, crashed 9.09 per cent to hit a 52-week low of Rs 85. Within 45 minutes of Mukesh Ambani Reliance AGM, Bharti lost Rs 12,000 crore in market capitalisation, while Idea Cellular eroded Rs 2,800 crore in market value.

Reliance Communications, the fourth largest operator by subscriber base, plunged 6.49 per cent to Rs 50.40.

The venture, Reliance Jio Infocomm, will be the world’s biggest startup with an investment of Rs 1,50,000 crore, the company had said in March. It is believed that the company’s subscriber base has already swelled to 25 million during trials.

Incumbent players were tightening their belts and had announced various schemes to retain existing subscribers “We continue to remain cautious on the sector in the light of the twin risks of Jio’s impending launch and the upcoming spectrum auction,” Credit Suisse said in a note.

Goldman Sachs in a note said that the response to this new entrant has been positive, with long queues in company stores. “We expect Jio to garner 35 million subscribers over the next two years, with data volume growth for incumbents slowing to 50 per cent in FY17E from 70 per cent in FY16,”it said.


About CA Karishma

I am a Chartered Accountant by profession and an avid teacher. Writing is my hobby and this blog is a platform to share knowledge and interact with prospective Chartered Accountants. I locate my work at the intersection of Chartered accountancy & education. I teach among others, Taxation at Tapasya Academy for CA, one of the premier institute for Chartered Accountancy course in Andhra Pradesh.

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