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Instead of a drop in telecom tariffs what the industry is witnessing is an all-out war as Reliance Jio Infocomm has unleashed an aggressive broadband plan to accelerate its user base that is likely to see a reaction from rival Bharti Airtel.
By slashing entry-level broadband rates by half, the Mukesh Ambani-controlled company has ensured that the average monthly revenue per user remains at low levels.
While RJio’s move is not likely to have an immediate impact on the fiber-to-the-home (FTTH) segment, it is more likely to have an immediate hit on the direct-to-home segment as well as the pay-TV market.
Cable users have seen a significant rise in cable bills and a drop in the number of channels. Those looking for cheaper alternatives will likely be attracted by RJio’s new plan that will help migrate pay TV customers to a converged digital ecosystem.
RJio has an ambitious target of getting 50 million FTTH connections and as of the end of December, it had only reached about 8 million subscribers.
Long term goal
While the company has ostensibly labeled its new broadband plan as a ‘backup’ plan,” it is still an obvious attempt by the company to undercut competitors. The company is likely to take a hit in the medium term due to a dilution in ARPUs (now at ₹500-700) but in the longer term it will benefit from a converged digital ecosystem and by that time subscribers may be prepared to pay higher prices.
Analysts said that with this move, the company hopes to increase its home broadband base, where it lags behind Airtel, and in the enterprise segment it is positioning itself as a second service provider at an affordable price.
In a note, ICICI Securities said that Bharti Airtel will have to launch a competing service as RJio’s new plan will likely affect its DTH business.
Revenue from DTH as a proportion of operating profit has been on a decline for Bharti Airtel, due to a significant shift in user base to FTTH, which happened during the Covid pandemic when people started consuming digital content.
“...if Bharti fails to launch competing services, it may lose FTTH subscriber market share,” the note said.
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