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Reliance Jio's new plan is here to stay and its a hard fight for other telcos

 2017-02-21 14:21:03.0

Reliance Jios new plan is here to stay and its a hard fight for other telcos

Reliance Industries finally revealed its pricing plans for its telecom venture Reliance Jio. The tariff plans will start from April 1, 2017 as its Happy New Year offer which gave 1 GB of free data per day ends on March 31.

Reliance Industries Chairman Mukesh Ambani said that, the new Jio plan will offer 20% more data than the best plan offered by the any rival operator,and domestic calls will be free till April 1, 2017.

Jio's aggressive pricing suggests that the price war is here to stay.

Telecom companies were banking on data as the driver for growth. December quarter numbers clearly showed the impact of Reliance Jio offer on these companies. Idea Cellular posted a 6.9 percent drop in its revenue and a 550 basis points drop in operating profit on a quarter on quarter basis. On account of its high operating loss the company ended up posting a loss of Rs 380 crore.

On the other hand Bhartiya Airtel saw its revenue falling by 5% and consolidating EBIDTA by 10% while its presence in other markets helped the company's to cushion the impact of its Indian counterparts. Though Vodafone dose not disclose its Indian number separately, its parent company had recorded a non-cash impairment charge of five billion Euros for the six months ended 30th September 2016, highlighting the pressure in its Indian operators.

The December 2016 quarter impact will be smaller than that in March 2017 quarter when the first full quarter of Jio impact would be felt on the telcos.

Market will be closely watching the stickiness of Reliance's 100 million consumers post the scheme launch. Average Revenue Per User (ARPU) for data of Idea and Bharti is Rs 200 per subscriber per month and a wireless ARPU of Rs 160 per user per month. Reliance has priced its product at Rs 303 to attract a major portion of the fastest growing data market. An important point worth noting is that the scheme announced by Reliance is a prepaid one meant to tap the low-end users

Reliance wants to add as many members as possible to its list before the revenue goes live,by offering a window of March 1 to March 31 for availing of Jio Prime Membership Programme.

But weather the pricing is attractive enough to retain a portion of its present consumers intact will depend on how the other telecom players place themselves. Therefor, the impact on them will actually be felt post April and the June quarter will be the most keenly awaited one for these telecom players.

Based on the pricing announced by Reliance, it would requore the company to have 100 million subscribers to Jio Prime Membership Programme for its quarterly revenues to match Idea Cellular's standalone quality revenue and 170 million to match Bhartiya Airtel's quarterly revenue.

It is difficult to predict, but if 60% of current users stay and another 40 million sign up, it would mean that Jio is already at par with Idea, and would have exceeded India if there were migrations away from the Bhartiya Airtel's group.

According to the given history and modus oprendi of Reliance ,the company would continue with its aggressive pricing till it gets a lion's share of the market. While consolidation in the industry is unlikely to deter Reliance in its aggressive posture for gaining market share.


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