The three-month-old Reliance SIM has hit the telecom market hard. How long will the free run last?
Three months ago, when Reliance Industries chief Mukesh Ambani launched Reliance Jio바카라s services with the path-breaking 바카라everything free바카라 offer with free voice calls for life, Arpita Pal Agarwal, partner and leader in the telecom sector at PWC had told Outlook that Jio바카라s entry would force the incumbent telecom companies to go back to their drawing boards and relook at their tariffs as pricing for services would come down significantly.
Three months down the line, her words have proved prophetic as telecom players in India have tried every trick in the book to match Reliance Jio바카라s too-good-to-be-true offer. In the first three months itself, they have seen a significant dent in their revenues as Reliance Jio added 53 million subscribers in under three months. Jio바카라s disruptive pricing has now forced all the existing telecom players to re-launch their offerings with battered down tariffs and bundled offers.
Earlier this week, market leader Airtel launched a free Airtel-to-Airtel calling offer for its pre-paid users, who form the bulk of its subscribers. Under the new scheme, callers can avail of packs of Rs 145 and Rs 348 with which they will be able to make unlimited free calls to any Airtel number anywhere in the country, bringing down the walls of local and national STD calling. They will also get 50 MB and 1 GB data with the packs respectively. Jio has already made all local and national calls free to any network.
Following in Airtel바카라s footsteps, Idea Cellular soon introduced unlimited voice calls to Idea users for packs of Rs 148 and Rs 348. These are huge price cuts by the telecom giants, much lower than what they were peddling until three months ago.
Predictably, the offers are not limited to calls alone; they are being launched for data as well. Vodafone has launched an offer where its 4G pre-paid subscribers can avail of double the amount of data on their existing market packs starting from Rs 255. Airtel has also launched enhanced data packs where the prices have been more than halved. For instance, a 4-GB data pack that cost over Rs 700 earlier is now available for Rs 293 only.
바카라Jio has significantly dented the revenue of incumbent GSM players,바카라 says Mahesh Uppal, telecom expert and director of Comfirst. 바카라Most reports suggest this. Part of the reason is that it is difficult to brand a vanilla product like internet bandwidth. So an incumbent risks losing market share if it cannot match price of the new entrant competing with cut-throat prices. This has made the existing players reduce prices sharply.바카라
Realising the disruptive potential of Reliance Jio바카라s aggressive policy, telecom operators across the spectrum had opposed Jio바카라s free offer at every forum and even with the government. But since the 바카라everything free바카라 SIM hit the market, they are bending over backwards to match or even compete with Jio바카라s aggressive pricing model.
바카라The way Jio services are priced, it will bring further change in the pricing models in the industry,바카라 says Harsh Jagnani, Associate Head, Corporate Ratings, ICRA. 바카라The industry is expected to move to an ARPU(Average Revenue Per User)-based model wherein the companies will look at the total revenue generated from a user instead of per minute of usage or per MB used. Revenue break-up between voice and data will become less relevant.바카라 This, he said, will also force players to offer bundled services instead of pure voice or pure data. The models for the telcos will change gradually to offering one composite service which will include voice and data instead of plain vanilla voice or data as it is now.
With Mukesh Ambani announcing extension to Jio바카라s free offer from December 31, 2016 to March 31, 2017, on December 1, the rush to launch lower priced and free unlimited calling offers has increased further. In the last few days, almost all incumbent telecom operators have launched either low priced or enhanced data and voice-calling offers for their subscribers. This includes free and unlimited calling within the network, no STD or roaming charges, SMS packs and enhanced data access at same or lower costs. While, at the moment, most of these offers are for pre-paid customers who form the bulk of Indian mobile phone users, the offers are expected to come for post-paid users soon as well.
Experts feel, that this was inevitable and that incumbent players would be forced to go back to their drawing boards to re-chart their plans. 바카라Incumbents will be forced to bundle voice and data. Gradually voice will become free in the next 3-4 months from all operators,바카라 says Jaideep Ghosh, Partner, Management consulting, KPMG India.
As expected, the existing players have seen their revenues go down noticeably since Jio바카라s launch. 바카라Jio바카라s entry along with demonetisation is expected to lead to a 6-7 per cent dip in H2 FY 2017 revenues of the industry,바카라 says Jagnani. It is also evident that growth is also taking a hit. According to market reports, data growth for Bharti Airtel was down by 24 per cent and for Idea by 19 per cent in the second quarter this year. With Jio in the play, this is expected to go down further in the coming quarters. Last year, the industry was growing at an average rate of 60 per cent.
Experts, however, feel that while Jio has grown significantly in the last three months to reach 53 million subscribers, its real test will be when its free offer will be over and when it starts charging for its services though voice will remain free. 바카라One has to see how many of Reliance Jio바카라s 53 million subscribers are willing to pay for its services once the free period is over,바카라 says Ghosh. 바카라The new customer segment is extremely limited now as compared to 10 years ago when there were many who did not have a phone. We may even see a 50 per cent erosion in subscribers.바카라
The impact on the industry will also be visible at that time considering that most of Jio바카라s subscribers use its services as a second SIM card and very few use it as their primary service. This means Jio has not been able to move customers out of other service providers yet. 바카라The long-term impact of Jio바카라s entry on the industry can be estimated when its free offer ends and when we see its reported numbers in Q1 or Q2 of FY2018,바카라 says Jagnani. 바카라That is when we can look at a meaningful impact of Jio on the industry and see how many subscribers migrate to it and use it as their first SIM.바카라
Then there is the issue of quality of service. As of now, not many are satisfied with what they are getting out of Jio. Blame it on call drops, lack of interconnect points and inconsistent data speeds. The only thing going for Jio at the moment is the 바카라everything free바카라 offer which is helping it pull subscribers to its service. Says Uppal, 바카라It would appear that the quality of the Jio product is not substantially better to prompt a switchover to it, en masse. The network still has gaps in it and there are areas where the signal still does not reach.바카라
Would there be a drastic change once Jio starts putting a price tag to its services? Things might not change dramatically though. It might lose some subscribers but the ball is in Jio바카라s court. It has limited room to raise prices without being uncompetitive. And, its service would need to be comparable, if not superior, to that of the incumbents, if it wants to ramp up its market share. And that, in a fiercely competitive market, would be a tough task.