Long queues of people waiting to avail the lucrative opportunities offered by the launch of Reliance Jio Infocomm's 4G sim cards could be seen at retail outlets on Monday.
While a few customers were frustrated with limited stocks and activation issues, based on the rush and hysteria of customers, analysts suggested that the telecom unit of Reliance industries may look to slash or even extend its free offer on data after January 1, 2017 in a bid to boost customer volumes.
How successful Jio's launch offer of free voice and data services from September 5 to December 31 is in expanding customer base would determine Jio's future 4G pricing strategy. With further slash in pricing, Jio's competitors– Bharti Airtel, Vodafone India and Idea cellular will find it hard to retain high revenue data customers.
The enticing offers such as free voice calling, and no roaming charges for Jio customers and free access to Jio premium apps like JioChat, JioMusic, MyJio, JioMoney is expected to drive Jio's bid to grab 100 million customers in the shortest span. A person aware of the development also added that "it(Jio) will offer home care solutions such as switching on and off devices digitally, car solutions for tracking their movements, and premium content such as exclusive movies and shows."
Telecom Industry Price Wars
Experts point out that Jio's disruptive pricing model that boasts of the cheapest data plans in the world has been bankrolled by the cash pile of Rs 91,000 crore, sourced from the favourable balance sheets of parent Reliance Industries.
"Its free voice calls and dirt-cheap data tariffs offer might not seem sustainable in the long run, but one mustn't forget that Jio derives its strength from RIL's balance sheet, and can easily treat its pricing model as a business development cost to poach quality customers from incumbents over a period of time," an analyst at a leading foreign brokerage was quoted saying to Economic Times.
Analysts suggest that competitors of the telecom industry could adopt one of two strategies. They can either "wait and watch" or they could also follow suit and cut call charges soon to hold on to high-end Average revenue per user(ARPU) generating customers . The latter strategy is to keep customers who solely use phones for voice calls loyal, as that accounts for over 75 per cent of the revenue.
Jio's future tariff strategy "is contingent on how many quality customers it acquires by January 1" and how soon it's able to sort out traffic imbalances and reduce potential interconnect payouts to incumbents, according to Ex-Airtel CEO Sanjay Kapoor.
But apart from lowering call rates, experts suggest that the incumbents will also need to lower data rates, by increasing usage limits. At Jio's current pricing, the per megabit realisation is 11-12 paise, while incumbents realise 20-21 paise.
"This will need to come down to 14-16 paise, which will be about 20-25 per cent discount from current data rates, but still at a 20-25 per cent premium to Jio, which will be sufficient to stop the exodus of top customers," said a senior executive at a leading mobile carrier.
This is critical since nearly 30 per cent of customers generate 70 per cent of revenue for the incumbents and they are the users that will need to be ring-fenced from moving to Jio.
The Bharti Airtel stock was trading at Rs 313.60 at 11:20 AM, down 1.68 percent. Similarly the Idea Cellular stock was trading at Rs 83.45, down 0.71 percent around the same time on the Bombay Stock Exchange.
