The launch of the Jio Bharat phone by Reliance Jio at Rs 999 with 2G users as its target audience, has hit Bharti Airtel’s and Vi’s share price by 1.75% and 1.32% respectively today. Jio has created a competitive edge by pulling a phone with relatively cheaper tariff costs which might hurt other telco companies, said a Kotak Institutional Equities research report. The launch of the Jio Bharat phone, led by Akash Ambani – Chairman of Reliance Jio, and son of industrialist Mukesh Ambani – is expected to target 250 million feature phone or 2G phone users, instead offering them 4G services.
Jio Bharat’s recharge plan is 30% cheaper than Bharti Airtel’s plan, and offers 14 GB data for over 28 days, which is about 7 times more than Bharti Airtel, Vi and other mobile operators. This, in turn, could raise the competitive intensity in the telco industry, the Kotak report said. However, the additional upfront device cost could prove to be an obstacle for the existing feature phone subscribers of other telco companies. Hence, the Jio Bharat phone will likely find more takers among the new feature phone buyers, rather than the existing users of other players.
With both Bharti Airtel and Vi increasing their tariff price by significant amounts, Jio has swooped in at the right time with just Rs 123 with 14 GB and unlimited voice calls as compared to Vi’s revised price of Rs 179 for 28 days with 2 GB data. The report also stated that Vi recently reduced validity on Rs 99 minimum recharge pack from 28 days to 15 days in 3 circles.
However, to maintain its ARPU (average revenue per user) of Rs 193, Bharti Airtel is unlikely to roll back its tariff rates. Whereas, Vi is expected to take a more calibrated approach on further hikes, according to the report. With the current 2G users at 250 million in India, Jio is expected to raise the scale of such users to 4G/5G by offering enticing prices and the additional benefits attached to it.
Bharti Airtel share price fell 1.60% today to Rs 865.05. Vodafone Idea stock was down 1.32% at Rs 7.45. Reliance Industries share price fell 1% to Rs 2589.65. On the other hand, the benchmark NSE Nifty 50 rose about 0.5% today to above 19,400 points.