Reliance Jio has set an aggressive target of reaching 50 per cent revenue market share by 2021 despite being the last operator to enter the market.
In a meeting with analysts, Reliance Jio said that it started offering free services as it wanted to test its network capacity and also wanted to eliminate the ‘fear’ of using data amongst Indian consumers, who were not using data due to high costs.
The operator indicated that eventually it will increase tariffs to get higher returns. At the current price-point, the yield will be ₹30 per GB and overtime it will move to ₹50 per GB, the company told analysts.
“Jio believes that fundamentally the Indian telecom sector value will change from voice to data driven. As per the company, ₹1 lakh crore of revenues will shift from voice to data revenues. Jio believes that industry will continue to grow to ₹3 lakh crore by 2020-21. Jio believes that growth will be strong for industry over the next 3-4 years led by a data boom, and it has created capacity to serve 60 per cent of this demand,” said analysts at Bank of America Merill Lynch.
Analysts at Credit Suisse said that in addition to an update about their plans and business outlook, Jio management also provided insights into future product launches, such as the Jio Car Connect, and highlighted features and use-cases for applications such as Jio HealthHub, JioMoney, JioChat and others. Apart from mobile data, we see Fiber to the home (FTTH) as a key revenue driver for Jio. “We expect management focus to shift to FTTH post successful commercial rollout of the mobile network,” Credit Suisse said.Data revenues
JP Morgan said in its report that the essential assumption made by RJio is that data revenues could expand multi-fold as the capacity created by RJio creates its own demand and the incumbent industry players are unable to match RJio. “Admittedly, there was no guidance on near-term performance over FY18-FY19 and near term there is still capital spending (update likely in the next analyst meet), though the bulk of the spending is behind us.
“We still do not know if incumbent telecom players would be happy to let RJio take pole position and cede massive market share or if the large number of Indian consumers (~400 million or as much as 35 per cent of India’s population) would be receptive to paying a much larger amount for data consumption,” JP Morgan said
Analysts at Goldman Sachs said that the industry ARPUs are unlikely to rise meaningfully in the current climate.
“While we acknowledge that a shift from voice to data may be faster than our current expectations, we think it is unlikely incumbents will lose a meaningful portion of their revenues as they too have invested quite aggressively in building out their data network.
“This is especially true for Bharti Airtel, which has more 3G/4G (quantity) capable spectrum vs. Jio (1,203 MHz vs. 1,108 MHz for Jio). We also note that should a merger between Vodafone and Idea take place, Jio’s market share gains could become harder to come by,” Goldman Sachs said.
RJio, meanwhile, on Friday sweetened the deal for users by offering 5GB additional 4G data for cusomers who sign up for its prime membership by March 31.