Reliance Jio, which has been struggling to add new subscribers over the past three quarters, is hoping to see some uptick in the same with the launch of its new JioPhone, said analysts. This, however, may come at the cost of a tariff hike. During FY20, Jio added 20mn subscribers a quarter (on average), of which JioPhone contributed more than 50%. However, in FY21, Jio’s subscriber net adds have been down to 7 million a quarter (65% decline vs FY20). RIL had attributed this slowdown in JioPhone adds to certain supply-chain issues in 2020.
RIL launched JioPhones in 2017, which has since helped the company gain 22% market share despite being sold at a 40% discount to the average selling price of feature phones in India. When the phone was launched, a refundable security deposit of Rs1,500 was collected from buyers with a lock-in–period of three years. As that period nears expiry, Reliance Jio may see a subscriber churn which may impact its market share.
“Completion of three years of JioPhone’s plans has seen high churn in the last six months. Thus, this (the new offer) should help arrest the churn and also target 300 million low Arpu (average revenue per user) feature phone users," said an analyst, requesting anonymity.
Introduction of offers through JioPhone 2021 is seen as an attempt to retain subscribers completing their three-year commitment, as they get an economically beneficial annual recharge plan of Rs749 instead of the current minimum cost of Rs977 (@Rs75 for 28 days) for a similar unlimited offering.
"With new aggressive plans, RJio attempts to accelerate its subscriber addition by targeting feature phone users of incumbents," said Axis Capital in a note dated 1 March.
RJio estimates feature phone users at 300 million. Though Bharti and Vi have been converting 2G subscribers to 4G, 265 million of their subscribers remain non-data subscribers. RJio’s attractive pricing is likely to accelerate conversion rate to 4G (from 2G), though it may impact conversion rate of incumbents.
"The offer could be targeted at retaining a meaningful proportion of the estimated 25 million initial JioPhone users who had entered into three-year contracts in first half of 2018 and whose contracts could, therefore, be coming up for renewal," said Citi Research in a report on 28 February.
Analysts, however, expect that with wider availability of JioPhones, Bharti’s net adds may decelerate to 3-5 million a quarter this year against 14 million in fourth quarter of 2020.
Both Bharti and Vodafone-Idea (Vi) have a similar number of 132 million non-data subscribers, while that will also include multi-SIM subscribers with their usage limited only to incoming calls. Due to weak subscriber mix, Vi has a high sensitivity for subscriber losses, believe analysts.
However, Since Jio is a 4G only network, Vi's 2G subscribers cannot migrate to Jio unless they buy a new handset, whereas migration to Bharti requires no additional investment in handset.
With its new JioPhone offers, the telco plans to capture market share by signing up low-end (2G/3G) customers on other networks. Though Reliance Jio is currently India’s largest telco by market share, its net subscriber addition has been on a decline. It added only 478,917 users in December versus rival Bharti Airtel Ltd’s addition of 4.1 million.
Vi has been losing millions of 2G customers every month. It lost 5.7 million subscribers in December alone, the highest since March. With this, the telecom operator has lost 34.9 million customers during April-December.
Kotak Institutional Securities in a report said that the upfront payment (of Rs1,999) required to avail the bundled device plan could act as a deterrent for the customer segment being targeted by JioPhone offers, even as it provides attractive value for money in terms of unlimited voice and reasonable amount of high-speed data, covering the basic requirements of a smart 4G device, for two years.
According to the company data, Vi had 269.8 million subscribers as of 31 December 2020, down from 271.8 million in the previous quarter. It had 109.7 million 4G users in Q3 versus 106.1 million in the September quarter, indicating that it has lost 2G customers.
Reliance Jio in partnership with Google is designing an entry-level 4G or even 5G smartphone for a fraction of its current cost. The company plans to launch low-cost Android smartphones this year.
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