India’s largest telcos, Bharti Airtel Ltd and Vodafone India Ltd, reported a nearly identical sequential increase in mobile services business in the June quarter. Airtel’s revenues rose 0.75% to Rs12,857 crore, while Vodafone India’s rose 0.67% to Rs8,896 crore.

In each of the preceding two quarters, the onslaught from Reliance Jio Infocomm Ltd had led to a sequential decline of between 6-8% in revenue. Now, with Jio having moved from free services to discounted services, the bloodbath appears to have stopped, at least for now.

“In our view, in a level-playing field (Jio starting to charge from 1 April, even if still at a deep discount), incumbent operators have what it takes, in terms of network, execution, and brand among other aspects, to be competitive. ‘Free’ services offered by Jio in 2HFY17 created an impossible-to-compete-in playing field," analysts at Kotak Institutional Equities said in a note to clients.

Of course, while large telcos are showing signs of stability, small telcos are expected to continue reporting a decline in revenues . Cumulative revenues of small telcos – all excluding Airtel, Vodafone and Idea Cellular – had declined Rs840 crore sequentially in the December 2016 quarter and Rs1,460 crore in the March 2017 quarter, according to data collated by Telecom Regulatory Authority of India (Trai).

But note that this will be more than offset by revenues earned by Jio in the June quarter. Analysts estimate revenues of at least Rs2,000 crore for the quarter, with Jio beginning to charge customers. As such, industry revenues can be estimated to have recovered from the lows of the March quarter.

Of course, this doesn’t at all mean that things are back to normal. Revenues of the top companies are still about 14% lower compared to a year ago. And while revenues have shrunk, operating expenses have more or less remained the same, and capital expenditure has risen. As a result, profit margins have fallen sharply and there is cash burn instead of cash generation. Airtel’s earnings before interest, tax, depreciation and amortisation (Ebitda) fell 31% year-on-year, far higher than the drop in revenues, as margins fell over 800 basis points.

Operating free cash flow (Ebitda minus capex) of the India mobile business stood at a negative Rs645 crore last quarter, compared to a positive Rs3,217 crore a year ago.

Thanks to Jio’s highly discounted tariffs, incumbents have been forced to offer customers far more in terms of voice and data usage. While they have managed to keep overall revenues and revenue per user largely intact, volumes have risen sharply. Voice minutes carried on Airtel’s network have risen 34% year-on-year, and data traffic has risen by three times. Needless to say, these growing volumes have associated costs both in terms of operating expenses and capital expenditure. For instance, to support growing data volumes, incumbents have no choice but to quicken the pace of their network rollout.

What’s more, revenues are expected to go south again in the September quarter due to the seasonal impact of the monsoon, and the fact that a higher goods and services tax rate has largely been absorbed by the industry. Analysts at JM Financial Institutional Equities expect a recovery from the September quarter, although, as they say, “In light of Jio’s 4G feature phone launch, the recovery may not turn out to be too meaningful." In fact, since the feature phone targets a previously untapped segment (as far as Jio is concerned), incumbents may be forced to take more price cuts as well as offer bundled services (which include a device) to its feature phone user base. All of this involves higher costs, and hence lower margins.

In sum, Indian telcos may not witness the sharp declines in revenues as they did in the December 2016 and March 2017 quarters; but as far as profitability and other metrics go, the worst may be yet to come.