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

The Economic Times - - Companies: Pursuit Of Profit - Kalyan.Par­bat@ times­

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.

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