The Rs 22,000-crore postpaid market is set to witness a big churn beginning Diwali with Reliance Jio trying to increase its presence here by poaching customers from Bharti Airtel and Vodafone Idea, as it launches its 5G services in the four metro cities.
According to analysts, a tariff war is imminent between Jio and Bharti as postpaid users are high paying subscribers. While Vodafone Idea is seen to lag behind in the 5G game, Bharti Airtel will give a tough fight to Jio as it would try to retain its high Arpu (average revenue per user) users.
The postpaid market forms 15% of the telecom sector’s revenues and 5% of active subscribers, according to industry estimates. Around 50-60% of these subscribers are enterprise customers and 34% are situated in the three metros and another 36% in urban centric A-circles. Among operators, Vodafone Idea has the highest 43% market share followed by Bharti Airtel at around 28%.
Jio, which broad-based its postpaid plans only in September 2020, currently has a very low market share in this segment. Analysts said that postpaid users would be the first ones to move to 5G plans once they are launched and therefore Jio, which is going to launch the services in the four metro cities of Delhi, Mumbai, Chennai and Kolkata, would definitely try to get more of these subscribers.
There’s not much of a difference in the 5G launch targets of Jio and Bharti. After the launch in four metros around Diwali, Jio plans to complete pan-India coverage by December 2023. Bharti has a similar timeline. It plans to launch its services in October and extend coverage to 5,000+ towns and cities by March 2024.
The competition is going to be tough as around 50-60% of Bharti’s postpaid subscribers are enterprise customers, so their focus is less on pricing and more on sustained track record of service delivery.
Analysts said that the advantage Jio would have with 5G launch is its better voice quality, especially indoor coverage because of the 700 Mhz spectrum which it acquired in the recently held auctions.
The advantage Jio will have with 700 Mhz is that it can roll out standalone 5G services, which Bharti and Vodafone Idea will not be able to do. Under standalone 5G services, the core network of 5G and 4G services are separate and therefore an operator can provide different data speeds to consumers depending upon their need and usage.
“With Jio acquiring 700 Mhz, we believe that the company is well placed to roll out standalone (SA) 5G. The advantage of SA 5G is that the company would be able to offer the true low-latency applications, such as slicing. This is difficult for its peers to offer given the lack of spectrum (telcos cannot roll this out on 4G bands). While 5G SA still lags in terms of handsets, equipment and application, we find Jio better placed than its peers to offer differentiated service. This could help the company to poach high-end customers from its competitors – likely increasing competition at the high end,” Bofa Securities had said in its report.
Jio and Bharti will also compete fiercely on the fibre-led broadband front with the launch of 5G services. Currently, Jio Fibre has the higher user base of 7 million and the company plans to take it to 100 million homes in a short period. Bharti is only a little behind Jio with around 5 million fibre-based broadband subscribers.
Jio’s plans to give a big push to its 5G fibre services through what it calls JioAirFiber, through which it expects to deliver these services to personal Wi-Fi hotspot devices (plug and play with no wires), which is to be called Jio AirFiber Home Gateways. This is something which Bharti can also provide but analysts feel that with 700 Mhz, Jio may have an edge when it comes to the voice quality of voice over internet protocol calls on such networks.