R-Jio: 72 mn willing to pay but free services extended by another three months!
Of the two extensions announced by R-Jio – a 15-day one for signing up for Jio Prime membership and a 3-month one for continuation of free services – the latter ie the summer surprise offer was indeed a surprise. Jio, the grand experiment involving brute force of massive capital to disrupt an established industry, continues to defy conventional business logic, this time defying it by leaving nearly $800 m revenues on the table from the 72 m customers who have expressed their willingness to pay. Near-term prognosis for incumbents perhaps worsens further even as we continue to see significant value emerge in the medium term.
The event – Jio announces 72 m Prime sign-ups but extends free services by three months
Jio’s free service offerings, since Sep 2016, get another 3-month extension with a slight twist. The fresh three months’ worth of ‘complimentary’ (free) services would be available only to customers who sign up for Jio Prime membership and recharge with a plan of `303 and above before April 15, 2017 (see Exhibit 1 for details of Jio’s available Prime plans). Customers who had already signed up for Jio Prime and made a recharge of `303 or above would be automatically signed up for the new offering (dubbed Summer Surprise). Benefits associated with the recharge would accrue to the customer in the month of July. Essentially, this is a 3-month free offering that comes bundled with a `303+ recharge – a move forward from the nostrings-attached free offering under Jio Welcome and Jio Happy New Year offers but a surprise nonetheless in the context of Jio’s recently announced intent of charging customers from April 1, 2017.
The incomprehensible – 72 mn willing to pay but “no, thanks”: Jio
Jio’s announced 72 m Prime membership sign-ups were above our expected 50 m. Bigger surprise, however, was Jio’s decision to extend free services by another three months despite now having 72 m subs who paid `99 one-time charge to express their willingness to pay for Jio’s services from April 1, 2017. Assuming around `250 as likely ARPU from these 72 m subs, Jio has essentially decided to leave nearly $800 mn (`54 bn) in revenues on the table. One can hypothesize on the likely business logic behind an unconventional move like this, but we guess the word ‘unconventional’ captures it well; we do not think we, with our thinking anchored to conventional business logic, can comprehend Jio’s moves, however hard we try.
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Our post-truth analysis of Jio’s three big offers before the recent one – (1) Jio’s preview offer was about ‘we are completely unsure of our product and need to seed LYF VoLTE handsets so that third-party VoLTE handset launches accelerate; hence, won’t charge’, (2) Jio’s welcome offer was about ‘we are still unsure of our product quality at a larger scale and there is very little customer-level feedback to expect mass sign-ups; hence, won’t charge, (3) Jio’s happy new year offer was perhaps about ‘we are confident of our data product but our voice product still has some gaps, not sure the customer would pay us yet; there are still a sizable number of 4G handsets out there that do not have a Jio sim; makes sense to still not charge.
However, the recent offer is one where even our post-truth wisdom fails. At 72 mn, Jio would capture nearly 55% of all 4G handsets in the market; 72 mn customers have paid money to express their willingness to pay further – large enough for Jio to feel confident of its product, in our view. So, 72 mn subs willing to pay; Jio says “thanks but not yet; here’s another three months of free”; we say “we don’t quite understand”. On a lighter note, there is perhaps a ‘monsoon hungama’ left still that completes the circle from RIL Telecom 1.0 to 2.0.