 "RIL Chairman Mukesh Ambani with wife Nita and son Akash. Pic: Kamlesh Pednekar")
Analysts are divided over the impact that Jio's tariff plans would have on incumbents. While Credit Suisse analysts maintain their cautious stance on the sector given the aggressive tariffs, those at UBS believe that the data market expansion will benefit incumbents with casualties in the medium term being smaller players such as Aircel, Rcom, Tata DoCoMo and Telenor. They add that the addressable market for 4G currently is around 5 per cent of India's mobile users and do not expect high end users to shift immediately.
Interestingly, Jio's plans are more focused on the mass market than that of incumbents. At Rs 149 the company is offering 300 MB of data and unlimited local and roaming voice free and access to Jio entertainment apps. The company does not plan to charge for SMS either. For the higher end consumer the benefits are much more as Jio is offering data at significantly lower tariffs. However, the benefit of Rs 50/GB is only available for high end users or data sharks.
According to analysts the data war has just begun and will only accelerate in time. According to Bank of America Merrill Lynch, "Incumbent telcos would not aggressively match Jio’s offering but try to be at a mild premium to Jio, thereby providing some space for Jio to gain market share. Else, it would lead to Jio getting more aggressive to gain traction but at the cost of impacting industry profitability/returns."
High end subscribers look at network stability and will not be swayed by attractive offers, says an analyst at a foreign brokerage. Given that meaningful packages start from Rs 499, current data ARPUs which are in the Rs 140-Rs 200 range will move up. While Incumbents will look to protect their average revenue per user, data realisations will fall by about 50 per cent (earlier estimates put it at 30-35 per cent dip) if incumbents match Reliance Jio's plans. Current realisations are at 16 paise per GB which could come down to 10-11 paise for incumbents while RJio is offering its services at Rs 50 per GB or 5 paisa per MB. Analysts estimate that data revenues for incumbents would decline by about 10 per cent as against earlier estimates of flat to 10 per cent growth for FY17.
Given the pressures on data which account for about 25 per cent of revenues, the topline of incumbents could fall by 10 per cent in FY17 and to a larger extent in FY18. The impact on margins given higher variable expenses will be more.
Dharmesh Kant Head - Retail Research, Motilal Oswal Securities said Reliance Jio has delivered a knockout punch on pricing of voice and data tariffs which everyone was waiting for and there is no doubt that tariff plans for voice and data is going to be a game changer for telecom industry.
GSM industry body COAI said the voice is actually not free as it comes bundled with data and since Jio has an all IP network, so even the voice calls made on the network use data. “Voice is not been given as free, its being bundled. It all depends on how much of data versus voice you use,” COAI Director General Rajan S Mathews told Business Standard.
