1. Reliance Jio offers: Telecom tariff wars to continue, says Jefferies

Reliance Jio offers: Telecom tariff wars to continue, says Jefferies

New plans launched by R Jio under ‘non-prime’ are targeted only at ARPU <Rs 150 with the main focus on high ARPU customer retention for now.

By: | Published: May 6, 2017 3:19 AM
R Jio primary aim would be retention of existing customers for now. (Reuters)

New plans launched by R Jio under ‘non-prime’ are targeted only at ARPU <Rs 150 with the main focus on high ARPU customer retention for now. At the same time, response from incumbents has been aggressive with tariffs indicating pricing pressure would continue. R Jio’s voice connectivity has improved and data from TRAI suggests highest data speeds. This will sustain the tough competitive dynamics for the incumbents and continue the trend of ARPU decline.

Prepaid plans launched in the non-prime category focus only on ARPU < Rs 149, underlining the company’s focus on the higher ARPU segments. For prime members, R Jio had already launched the Rs 309/509/999 plans, which give unlimited data and voice for different levels of free usage per day (postwhich speed drops), for three months. At Rs 103 ARPU, these are significantly lower than similar plans and even average ARPUs of the incumbents, and have already caused a shift in volume away from the incumbents. R Jio primary aim would be retention of existing customers for now. As of March 31, the company has 109 million total subscribers with 72 million having signed up for the prime membership Impact on incumbents (Airtel, Idea, Vodafone) so far has mainly been on account of volume churn that has impacted ARPUs. To prevent subscriber churn, incumbents have aggressively increased free data and voice limits in similar ARPU buckets as the prime plans launched by R Jio (similar services till a few months back were in ARPU >Rs 2,000). However, the offering of incumbents still remains inferior to R Jio’s offering as the free voice offered by them is still on-net vs all free for R Jio.

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This could be the next downward iteration to prevent subscriber churn, in our view. Per TRAI data, R Jio’s data speeds have seen a significant improvement between Jan and March, an increase of 2x despite the subscriber additions and incremental traffic on the network. This is better than the speeds recorded by incumbents on an average and for 4G only networks. Anecdotally, we have also seen an improvement in the voice connectivity of R Jio (refer past issue of points of interconnect) even if they are not at the same seamless levels as the incumbents yet. We think this set up is negative for future ARPU trends of incumbents as in the absence of any real difference in services, tariff war becomes even more imminent.

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