Jefferies says Reliance Jio ‘interconnect charges to be less if user base expands’

By: | Published: September 3, 2016 6:04 AM

R Jio launch is disruptive due to voice being made free and 29-54% cuts on data vs current blended pricing.

Reliance JIO 4g launch, JIO 4G Launch, Reliance JIO 4g, JIO 4g, Reliance JIO 4g SIMThe main disruptive feature of R Jio’s launch was the free voice calls with data pricing at a 29-54% discount to current blended realisations across operators.

R Jio launch is disruptive due to voice being made free and 29-54% cuts on data vs current blended pricing.

These disruptive changes would create pressure on incumbents on multiple fronts — future of the $ 22 billion voice market (80% of total mobile GR); Loss of subscriber and revenue share; Realisation pressures on data and impact on data usage and ARPU dynamics; Cost pressures in face of increased competition; Capex and pace of network rollout.

The main disruptive feature of R Jio’s launch was the free voice calls with data pricing at a 29-54% discount to current blended realisations across operators.

We believe that the plans have been cleverly designed to first increase adoption (149 plan) and then migrate them to higher usage with high ARPU plans.

A key ambiguity on VoLTE (Voice over LTE) is if it would use data. Our checks and the press release indicate that this is not the case and that voice calls and national roaming are indeed free. This raises the question of interconnect charges that R Jio would have to pay at 14paise/min. Even at a broad average monthly minutes of usage (MoU) of 400 would lead R Jio to foot a R56 bill for every connection initially. Given the free usage, this bill would only be higher although could reduce/stabilise once the user base for R Jio expands and there are lesser off-net calls (an offsetting for more incoming calls).

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition