Tough 2018 for telcos as Jio price cut may delay ARPU recovery: Report

Disruptive pricing strategy of Reliance Jio may leave competitors bleeding as the latter’s average revenue per user  level, a key profitability gauge for the industry, is likely to remain low.
Disruptive pricing strategy of Reliance Jio may leave competitors bleeding as the latter’s average revenue per user  level, a key profitability gauge for the industry, is likely to remain low.
Disruptive pricing strategy of Reliance Jio may leave competitors bleeding as the latter’s average revenue per user  level, a key profitability gauge for the industry, is likely to remain low.

NEW DELHI: The disruptive pricing strategy of Mukesh Ambani-led Reliance Jio may leave competitors bleeding as the latter’s average revenue per user (ARPU) level, a key profitability gauge for the industry, is likely to remain low.

According to a new report, incumbents’ ARPU recovery may delayed. Reliance-run Jio had last week announced another Rs 50 reduction in its existing plans and/or 50 per cent more data per day on plans ranging from Rs 199-498.

“The latest price cut indicates pricing discipline may still be uncertain and highly dependent on consumer behaviour despite industry consolidation paving the way for long-term structural improvements. This move will further delay ARPU recovery,” India Ratings said on Tuesday.

“Although current competitive tariffs do not seem sustainable, the short-term ARPU outlook remains subdued, indicating another tough year for the telecom sector,” it said.

Two large telecoms registered an Arpu decline of 25 per cent year-on-year in the second quarter, while Jio reported an ARPU of Rs 156 in the same quarter, which was higher than Rs 84 recorded by the industry.
While for Jio the entire customers are in broadband data subscribers, for the industry this constitutes only 20 per cent. Non-broadband subscribers are typically low ARPU-generating customers.According to the agency, top telecoms would focus more on increasing their subscriber market share than revenue market share in 2018 and the dual-SIM phenomenon will continue for longer-than-expected, given the low customer loyalty and high price sensitivity.

“The industry pricing trend is moving towards competitive on long validity plans to increase customer stickiness,” it noted.

Mounting pricing pressure, debt burden and capital outlay needs have led to the exit of small telecoms, while the larger ones have prepared themselves for the continued challenging environment through asset sales, besides industry consolidation.

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