Apart from Reliance Jio (RJIO), to quote its release, beating even the likes of Facebook, WhatsApp and Skype in getting a record 16 million customers in the first 26 days of its launch, its bigger impact is to change the structure and nature of industry pricing. Though it is obvious customers rushing in to buy RJio SIMs will only pause to think once the free-service offer expires in December, incumbent telcos are not taking a chance and bettering their offers with almost each passing day. While the real impact will be felt only later, Kotak Institutional Equities expects Bharti Airtel’s Q2FY17 revenues to be sequentially down 2.4% and Idea’s 3.4% – Q2 is traditionally a bad period, but the expected contraction is more than what is normally witnessed. It is difficult to predict how much RJio will cannibalise into the customer base of incumbents like Airtel, Vodafone and Idea – and in which customer segment – but telcos are responding very smartly.
The sub-Rs 100 customer of incumbents, you’d think would be easy fodder for RJio whose Rs 149 plan offers 300MB of data, 100 SMSs and free voice. But if the average billing in this bucket is Rs 52 per month – based on a Kotak report – can this customer spend the minimum of Rs 3,000 required to buy a 4G/Volte phone that is required to be able to use RJio’s service? The Rs 200-500 per month customer offers a better market for RJio. Over 40 mn people in this usage bracket, Kotak says, spend around Rs 350 per month for voice and 420MB of data. Using various combinations of RJio’s Rs 149 plan with appropriate top-ups can give the customer the same amount of data at Rs 221 (around 40% less) or three times as much at Rs 330 per month – once again, the choice before the customer is to spend a minimum of Rs 3,000 for a 4G/Volte phone, but at a certain point the equation tilts in favour of RJio. That is why incumbents like Airtel and Vodafone are even bettering the offer in some parts of the 4G segment that RJio competes in. While RJio’s USP is the Rs 50/GB claim – in the Rs 2,499 pack, it actually works out to Rs 71.4 – both Airtel and Vodafone have Rs 25/GB offers provided customers buy a new 4G phone – these are offered by giving 9GB of data free to a customer who buys 1GB for Rs 250 along with her new phone. The aim is to drive home the point that customers who don’t have 4G phones will need to buy one for RJio services.
For customers who already have 4G phones, incumbents are working on RJio-style bundled offers. Vodafone, for instance, has bettered its Rs 699 offer and bundles 1,000 minutes of voice and 500 SMSs with 4GB of data – this used to be 2GB just a few days ago. This is still more expensive than RJio’s Rs 499 for 4GB of data with free voice and SMS, but there is little point cutting rates further if the migration to RJio is not significant. While there is no clarity on where rates will finally settle, it seems apparent in the 4G segment at least, the days of charging for voice and SMS are over – a flat monthly revenue, with customers free to use their data limits as they please, is the way of the future.