Rel Jio’s Prime Move May Not Offer Big Relief to Incumbents
Telco to gain even if it manages to retain just over half of its 100m users, feel experts
Kolkata: Come April, it’s likely to be Advantage Jio vs the country’s Big 3 phone companies — Bharti Airtel, Vodafone India and Idea Cellular — if the Mukesh Ambanirun telco manages to retain just a shade over half of its 100 million customers once it starts charging, analysts and industry experts said. Mukesh Ambani on Tuesday said existing Jio customers would have to pay a one-time .₹ 99 fee for ‘Prime membership’ and another .₹ 303 a month to avail of all benefits of the unlimited voice and data ‘Happy New Year’ offer.
According to experts, customers who stay with Jio are likely to cut back usage levels sharply on their primary SIMs, and may downgrade to a lower plan or move to a voice-only back-up variant with their original carrier, as many would question the wisdom of paying for two subscriptions.
Some say the top three phone companies could lose as much as 9-10% of their premium customers, who typically, generate over half their revenues.
“Round 1 with six months of free services went to Jio and Round 2 will also end up going to them if anything over 50 million trial users sign up to Jio’s Prime (paidservices) by end-March,” brokerage Sanford Bernstein said in a note.
The brokerage said ‘Jio has set new expectations’ by bringing high-speed mobile data to millions of Indians for the first time, and the bar is ‘much higher now’ than it was before. Analysts at Edelweiss backed the view, saying ‘the high data usage habit’ would be a subscriber retention driver for Jio.
Small wonder, experts believe Airtel, Vodafone and Idea could be staring at rapid customer losses and plunging revenues amid a sharp likely surge in competitive intensity unleashed by Jio’s decision to offer unlimited voice calls and nearly 30 GB of data for a monthly charge of .₹ 303 from April. Analysts at UBS warned incumbent carriers could see ‘an acceleration in customer losses to Jio’ in the next six weeks as subscribers are likely to take advantage of the 4G entrant’s new unlimited offer, which is valid before March 31.
The foreign brokerage, in fact, is keeping a close watch ‘on reactionary unlimited (pack) launches from incumbents to stem potential customer losses’. Analysts at HSBC agreed incumbent telcos ‘don’t have much choice other than matching Jio’, but the brokerage voiced scepticism about Idea and Vodafone India’s ability to do so immediately, given their limited 4G spectrum holdings by comparison. So much so, the brokerage feels incumbents may be compelled to boost data capacity on a war footing and accelerate investments in fibre backhaul with a sharper 4G focus, and also look at swiftly refarming the low 900 MHz spectrum band for fourth-generation mobile broadband services.
Brokerage Credit Suisse, in turn, said Jio’s .₹ 303 per month offer is perhaps ‘the first unlimited voice + data plan in India that effectively puts a cap on the ARPU (average revenue per user) of all higher-end subscribers’ of incumbent operators and could be ARPU dilutive.
“Nearly 50% of revenue of incumbent operators like Bharti Airtel come from subscribers with .₹ 300-plus ARPU (with average levels of .₹ 550-plus). Jio’s .₹ 303 per month plan puts an ARPU ceiling on all such subscribers,” said Credit Suisse in a note.
Industry experts agree that any effort to match Jio’s tariffs could progressively shave off nearly 40-50% of the incumbents’ revenue that Airtel, Vodafone and Idea typically generate from high-end customers.