The outlook of the Indian telecom sector has been downgraded from 'stable' to 'negative' for the current fiscal by India Ratings and Research agency on the back of intensifying competition in the space.

"India Ratings and Research (Ind-Ra) has revised its outlook on the telecommunications services sector for FY 16-17 from stable-to-negative," the rating agency said.

The ratings' agency said that the launch of Reliance Jio (RJio) will ruffle the competition and will eat into the market share of existing players.

"The rating agency expects the launch of Reliance Jio (RJio) to intensify competition in the telecom space, which will squeeze the market share, earnings before interest, taxes, depreciation and amortisation (EBITDA) margins and credit metrics of incumbents," Ind-Ra said in a statement.

It also expects competition to increase as RJio contends for market share out of the existing pie of subscribers which are being serviced by incumbent operators.

As a result, data market will be first to face the impact of increasing competition, leading to a decline in data average revenue per users, it said.

The rating firm noticed a decline in revenue realisation of Airtel and Idea Cellular by 4.5-5.5% on a quarter-on-quarter (q-o-q) basis.

"Ind-Ra believes this price decline was in anticipation of the RJio launch, and, therefore, expects a further softening of data tariffs in the financial year 2016-17," the statement said.

It expects voice revenue in the sector to moderate during the current financial year on stagnant minutes of usage and further competition in call realisations.

Furthermore, the agency expects data revenue to remain stagnant on account of 30-40% decline in data realisations per megabyte in the current fiscal, driven by RJio's launch.

"The operators' debt profile will deteriorate in FY16-17 as the agency expects them to incur high capital expenditure (Capex) on network expansion and acquisition of additional spectrum through trading, largely to compete with RJio," it said.

Spectrum auction will add to the pressure for telecom operators as it will further impact their debt profile.

"Highly competitive biddings to acquire spectrum in upcoming auctions, thereby impacting operators' debt profiles could lead to Ind-Ra revising the sector outlook to negative," the firm said.