Reliance JioPhone Promotional Offer Will Help it Gain 2G Subscribers from Rival Telcos: Analysts

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Reliance Jio Infocomm is shipping offers on it feature phone, the JioPhone, and as per the analysts, this move could be aimed at poaching the 2G subscribers of the rival telcos, Bharti Airtel and Vodafone Idea. However, an ET report which suggests the same also noted that while this move will help Reliance Jio in gaining subscribers, it might come at the cost of a slight dent on the ARPU (Average Revenue Per User) which remains a key metric in the industry especially at a crucial time like this. It is worth noting that on Tuesday, the Mukesh Ambani led telecom operator, Reliance Jio announced a limited promotional offer sale on its 4G feature phone, the JioPhone thus bringing down its effective cost by almost 50%.

Reliance Jio Moving Towards its 500 Million Subscribers Goal

According to the analysts at the brokerage firm, Emkay, “The offer clearly targets non-data/2G subscribers of Bharti and VIL, which stand at 42% and 52%, respectively. The move is negative for both Bharti and VIL, and historically VIL has been more susceptible to market share loss.” It is also clear that Reliance Jio has set the target of reaching 500 million subscribers, and the telco is definitely serious about it. The latest offer on JioPhone is surely bound to help the Mukesh Ambani led telco in moving closer towards its goal. The telecom operator currently boasts of having 339.7 million subscribers according to the data put out by the Telecom Regulatory Authority of India (Trai).

Reliance Jio's ARPU to Take a Hit While Subscribers Rise

Varun Ahuja and Viral Shah of Credit Suisse have also remarked that the recent move by Reliance Jio has stalled the hopes of tariff increase by the telecom operator, as the company currently stays in the “grab” phase. By this, the analysts mean that while many expect Reliance Jio to raise tariffs in an attempt to increase its ARPU, the telecom operator is still eyeing a massive subscriber base thus keeping ARPU aside and letting the tariff rates persist as they are. It also cannot be dismissed that moves like this are going to negatively affect the telecom operator’s ARPU, which has gone down consecutively for six quarters, including the last April-June period as well. The analysts note that this is because of the fact that consumers who move from 2G services to 4G services initially opt for lower tariff plans until they are ready to move up the ladder to higher-priced plans for more data and services.

Reliance Jio ARPU Drops Low to Rs 122

Choksey, MD at KR Choksey Investment Managers, said “This is a smart strategy to acquire new customers. In the next few quarters, there will be an ARPU drop but a company looks at long term and sustainability,” he further added, “Jio is well-positioned because these customers will move onto higher tariff plans as they consume more data, and later on when broadband is offered, there will be more takers.”

The telecom operator’s average revenue per user remains at Rs 122 and in such a time where other rival telcos, Bharti Airtel and Vodafone Idea have managed to push their ARPU figures upwards with the help of changes in their postpaid portfolio and minimum recharge plans in the prepaid sector. Bharti Airtel which used to have a lower ARPU now boasts of Rs 129. With this new offer, Reliance Jio plans to dominate the feature phone market, which comprises 48% of the total mobile phone market in India.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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