Reliance Jio’s cheap 4G handset, JioPhone, is set to accelerate internet adoption in India and should help reverse the recent decline in telecoms industry revenue, Fitch Ratings said. The phone will also allow Jio to gain revenue market share as it allows the telco to attract first-time 4G users.
Fitch said that Jio’s 4G handset is likely to quickly replace 2G handsets in rural areas, where smartphones had previously been out of reach for many potential customers. It will be available for a Rs. 1,500 deposit – which will be refundable after three years – compared with a price of at least USD60 for existing 4G smartphones. India’s internet-adoption rate is among the lowest in Asia-Pacific, owing largely to low smartphone affordability and a lack of fixed-broadband networks in rural areas. Around 95% of the country’s 422 million internet subscribers were wireless users as of end-March 2017, according to the Telecom Regulatory Authority of India (TRAI), and most of those access the internet through smartphones.
JioPhone would add 3%-4% (or around USD950 million) to annual industry revenue if adopted by at least 100 million subscribers, which appears likely, according to Fitch.
Industry-adjusted gross revenue is now likely to rise in 2018, after the quarterly industry revenue declined by 15.6% YoY to USD6.1 billion in the quarter ending March 2017. Growth will be driven by increased data consumption and a rise in average spending per user. The monthly tariff on Jio’s 4G phone of USD2.3 is more than 50% above the current average revenue per rural user, most of which are on 2G phones and consume minimal data.
Jio is likely to boost its revenue market share from 3%-4% to more than 10% in 2018. We expect most of the increase to come from new revenue generated by the expansion of the 4G market. The higher monthly tariffs that Jio is charging on this handset are likely to limit the impact on the revenue market share of incumbents such as Bharti Airtel. Incumbents might also see some benefits to the extent that Jio’s strategy increases adoption of 4G and helps develop India’s smartphone culture – raising data usage and average spending across the market.
“Nevertheless, we maintain a negative outlook on the Indian telecoms sector, which reflects the broader pressures created by Jio since its entry last year,” it said.
According to Fitch, Jio is likely to roll out other offers to increase its subscriber base over the next biennium, and incumbents are likely to continue to respond with price cuts, discounts and promotions of their own.
Jio had already reached 89 million active subscribers at end-May 2017, giving it an 8.7% share of active subscribers. Its revenue market share is much lower, as it has so far completed on an aggressive pricing strategy.
Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.