MUMBAI: Bharti Airtel, Vodafone India and Idea Cellular are likely to emulate Reliance Jio by raising prices but only after the latter launches its mass market 4G VoLTE feature phone to get a better sense of the Mukesh Ambani-owned telco’s future offerings, analysts said.
“We expect incumbents to follow suit in raising effective prices but leave a 15-25% price gap with Jio, although such announcements could only be made after Jio’s feature phone launch,” brokerage UBS said in a note.
A top analyst at another global brokerage said it wouldn’t make sense for the Big 3 incumbents “to price at par with the challenges as they would end up eroding their brand value”.
Jio is widely expected to unveil a dirt cheap 4G feature phone — HSBC expects it to be priced at Rs 500 — to tempt 2G customers to directly go to 4G.
Analysts expect Jio to deploy the combo of a fairly aggressive tariff offer and a super affordable 4G VoLTE feature phone to boost subscriber additions that have slowed down lately.
Brokerage JM Financial expects Jio’s latest tariff rejig to boost the company’s effective monthly average revenue per user (ARPU-net of taxes) on its revised Dhan Dhana Dhan base plan by 50% to Rs 142 from Rs 95 while keeping the product competitive enough to prevent churn.
On Tuesday, Jio increased effective rates on its 4G services by unveiling a new rate chart. It has reduced the validity period and data allowance on its popular Rs 309 prepaid plan to two months and 56GB from the earlier three months and 84GB, respectively.
“Any stabilisation in retail tariffs is helpful for the industry. However, it would be premature to say the price wars have come to an end. The market is still hyper-competitive and it will take another three to four quarters to determine if real price stability has returned,” said Rajan Mathews, director-general of the Cellular Operators Association of India (COAI), the industry lobby which represents GSM telcos including Airtel, Vodafone, Idea and Jio.
According to JM Financial, Jio’s revised Rs 309 offer remains competitive “with a daily cost of Rs 5.5 for users as against Rs 5.7-to-6.4 incurred in plans offered by Bharti, Vodafone and Idea.”
Analysts at the brokerage, however, feel Jio is unlikely to move to full pricing in the next cycle (post-56 days) as that would entail “a 100% jump in ARPU of its revised Rs 309 plan from Rs 142 to Rs 284”.A full pricing scenario, JM Financial said, is when Jio would reduce both the validity period and data allowance on its new-look Rs 309 plan to 28 days and 28GB.
UBS said Jio’s revised plans are the first signs of tariff rationalisation, with the 4G newcomer clearly aiming to reach “steady state tariffs” with the gradual withdrawal of promotional plans.
“Rationalisation of the plan signals Jio’s comfort with its current subscriber base and intent to start monetization,” the Swiss brokerage said in a note seen by ET.Harsh Jagnani, sector head at ICRA said: “Jio is now focusing on pushing up ARPU to improve its profitability after amassing more than 100 million subscribers”.
Source: Times Of India