4G entrant Reliance Jio’s speed of acquiring net active subscriber has slowed down, even as incumbent telcos like Bharti Airtel, Vodafone, and Idea Cellular continue to see healthy net active subscriber additions, Kotak Institutional Securities said in a note.
Kotak said that the 4G entrant is seeing the slowdown due to “addressable market challenges”.
The agency said, “Even as Jio’s free offerings meant a shift in usage from and decline in revenues for all operators, TRAI’s February 2017 subscriber report suggests that incumbents continue to see healthy net active sub adds, and challengers are losing ground even quicker.”
Kotak, however, said that subscriber share is a vital metric to gauge growth, but it not the most important variable.
“Most important is how the industry revenue curve shapes up and that depends solely on Jio’s pricing approach; this remains aggressive for now," it added.
Kotak said that Jio’s launch has not had any impact on the pace of active sub additions for the incumbents. Bharti Airtel, Vodafone, and Idea collectively added 28 million active subscribers since end-Aug 2016 or between September 2016 to February 2017, which is an increase from 14 million active sub additions over the previous six-month period (February 2016 to August 2016).
Customers continue to stay active on incumbents’ networks, despite being lured by Jio through free offerings since its commercial launch in September 2016, Kotak said, adding that customers who have taken a Jio sim continue to use the incumbent networks does indicate that there is some inherent or possibly legacy and coverage value that the customers continue to see in incumbent networks.
"Shift in usage (to Jio sims) was natural as incumbents (rightly) did not try to fight Jio’s free offerings (given that free is the only way to fight free). Now that Jio has moved to ‘charged’ offerings, however aggressive, incumbents have a chance to gain back some of the lost usage and spends," it said.
Kotak said that price cuts by incumbents forced by Jio have made incumbents attractive, versus challengers, for low-end customers.
In February, Jio had 76 million active subscribers, and it added an average of 13.7 million active subscribers per month since launch in Sep 2016.
The agency sees his slowdown as natural noting 4G device base limitations that Jio has to contend with.
India’s user base stood at 1.16 billion, while VLR or active base stood at 1.01 billion at the end of February 2017, as per Trai data.