Reliance Jio woos first-time subscribers from tier-2 and 3 cities by reducing tariff
Many in the telecom industry believed that after the consolidation wave last year, the tariffs might stabilise and the pricing might come back to the industry.
Published: 08th February 2018 04:34 AM | Last Updated: 08th February 2018 04:34 AM | A+A A-
Many in the telecom industry believed that after the consolidation wave last year, the tariffs might stabilise and the pricing might come back to the industry. This was also indicated when Jio raised the tariff of its popular prepaid and postpaid plans during Diwali.
“The trend [of intense price war among operators] will continue next year, whether Jio remains the huge dominant driver in 4G growth remains to be seen. After a year of free and steeply discounted data pricing, Jio may make 2018 the year it raises prices. That could level the playing field for India’s operators,” said a report by OpenSignal in October.
Dashing all such hopes, Jio has gone for two tariff cuts and a new plan exclusively for JioPhone owners in the first month of 2018.
As part of the special tariffs launched for JioPhone owners, the company now offers unlimited voice plan with 1GB of data at just Rs 49 for a 28-day billing cycle. It had come out with a similar plan for smartphone subscribers with 2GB of data usage at Rs 98.
Besides, it brought down the tariff of all its plans. The new tariff plans are likely to help Jio further gain subscribers, especially in the tier-II, tier-III cities and rural areas. Jio is clearly planning to capture as much market share as possible in 2018.
“While average revenue per user at the upper strata is capped (Rs 300-400), there is a potential to improve them at the lower strata by data adoption in the un-penetrated segment. Sixty-five per cent mobile subscribers were voice-only subscribers in September 2017 according to the Telecom Regulatory Authority of India. As tariff wars spread to this segment to capture a significant market share, industry Arpu recovery could become more challenging,” says the note issued by Ind-Ra.
The company has gained more than 150 million subscribers in the first 15 months of operations. Even so, it is a cause of concern for the company that most of its subscribers continue to use Jio SIM as an additional connectivity provider and not as primary connection.
The next wave of growth is going to come from the rural segment as the urban market is saturated. By offering a special tariff for JioPhone subscribers, Jio will gain market share in tier II and tier III cities and towns where feature phones dominate. The new set of subscribers are also coming from this segment and Jio hopes to capture this segment. New subscribers mean that Jio will be the primary connectivity provider and not the second SIM as it is in the urban market now.
The incumbents who are reeling under the impact of tariff war unleashed by Jio’s entry should brace themselves for tough environment in 2018 as well. The tariffs have already hit rock-bottom and profitability is under pressure for all the telcos. In the recently declared quarterly results, Jio is the only telco which has made a profit while Airtel, Vodafone and Idea have either reported a drop in profits or losses. This tariff drop by Jio will further pressurise the incumbents.
[The author is an independent journalist]