BofA Merrill Lynch and UBS Securities, in their initial reports, indicated that the launch of JioPhone and data plans will not disrupt ARPU of telecoms such as Airtel, Idea Cellular and Vodafone India.
Is the price high for masses?
“We do not see Jio being able to penetrate the mass market with the announced offer, as we see the monthly price of Rs 153 and Rs 1,500 deposit as still being steep for the low income consumers,” BofA Merrill Lynch said.
The data plan will not assist Jio to take on big telecom operators’ ARPU and their revenue streams from data and voice.
First, the price of the 153 data plan along with free voice is almost equal to the monthly ARPU of big telecom operators in India. The 309 data plan – now for two months – is also reflecting the average monthly ARPU of telecom operators.
Vodafone Group today announced that Vodafone India revenue fell 13.9 percent in the first quarter (April-June) of fiscal 2018 thanks to tough competition from Reliance Jio and other leading telecom operators.
Second, JioPhone is a single-SIM locked phone. This means that only Reliance Jio users can utilize the phone. They cannot use SIMs of rival phone service providers such as Airtel or BSNL.
Sachin Salgaonkar, Karan Parmanandka, Sanjay Mookim and Krishan Binani at DSP Merrill Lynch (India) said smaller telecoms will be losing their “value proposition” of lower priced voice offering, which would lead to a faster market consolidation. Smaller telecoms include Aircel, BSNL, Reliance Communications, Tata Docomo and MTNL.
BofA Merrill Lynch said maintaining of the Rs 153 per month ARPU will be positive for incumbents (same effective monthly price to currently active plan of Rs 309 for 2 months).
“However, we see the low priced sachet plans of Rs. 24/54 increasing the affordability of phone services, and could prove to be disruptive, leading to other telecom operators being forced to float similar plans,” BofA Merrill Lynch said.
Today’s announcement is not negative for Aircel as the announced plan caps the TV viewing to 3-4 hours per day, which will prevent users to switch to Jio PhoneTV. Long-term DTH ARPU growth will be under pressure from the offer and related developments. Airtel has a strong DTH business.
Jio Phone priced at an initial deposit of Rs 1,500 to the consumer can be used for three years, and get a full refund of Rs 1,500 by returning the phone to the company.
The Jio phone users will get the same benefits of Dhan Dhana Dhan offer — free voice/SMS and 1GB of data per day — at Rs 153 per month.
Along with the basic plan, customers can subscribe to Jio Phone TV offer, under which consumers will be given a cord through which they can connect phone to TVs to view content on the TV screen (supports all TVS, even CRT TVs will work). The plan with the Jio Phone TV Cable will cost Rs 309 per month, and will allow 3-4 hours of video viewing daily.
The price of Jio’s sachet plans is Rs 54 for a duration of a week and Rs 24 for a duration of 2 days.
Navin Killa, Namrata Penta and Curtis Li at UBS said JioPhone should support mass market adoption of 4G data, but prices are not ARPU dilutive.
“We expect Jio to thus continue to gain share from smaller operators as sector consolidates. We believe market leader Airtel with its ahead of curve investments and strong spectrum profile is well positioned to gain from the expansion in data market,” UBS said.
Baburajan K
