Reliance Jio Infocomm, a wholly-owned subsidiary of Reliance Industries Ltd (RIL), could emerge as the industry leader on revenue basis by 2021 and subscriber basis by 2022. The company controlled by India’s richest man Mukesh Ambani will continue to provide subsidy for JioPhones till this goal is realised, a report by Sanford C. Bernstein & Co said.
“We are now convinced Jio’s relentless subsidy of JioPhones will continue until this goal is realised. Shareholders in RIL are not complaining, preferring to see RJio continue to gain share, and we believe neither Bharti nor Vodafone Idea have the stomach to engage in a pointless subsidy war,” the study, prepared by analysts Chris Lane and Samuel Chen, said.
“Instead, we believe they have accepted their fate, and are looking forward to a time when RJio, having achieved a leading position, starts to monetise their base through higher pricing,” it said, adding RJio has national spectrum, has been building out national fibre, and has the backing of the richest man in India.
RJio sells JioPhone for a refundable deposit of ₹1,500.
The company will continue to add “significant” customers as it continues to subsidise JioPhones. RJio has consistently been adding 6-10 million new active customers per month (by visitor location registry).
“While not specifically disclosed, our understanding is that most of these additions are due to customers taking a highly-subsidised JioPhone. These customers are mainly located in rural area, as evidenced by RJio’s market share growth in ‘B’ and ‘C’ circles. Both Bharti and Vodafone management have indicated they do not believe in handset subsidies for pre-paid users,” it added.
Market share target
Bernstein now expects RJio to reach 28 per cent revenue market share and 26 per cent subscriber share by this fiscal year-end.
“We expected ‘unlimited’ voice and ‘big buckets of data’ to put pressure on the market – forcing consolidation of the many smaller players. We even contemplated RJio could eventually surpass Idea Cellular to become the third largest operator in the country,” the report said.
“No start-up operator has managed such a feat anywhere – and certainly not in a market where penetration levels among the ‘middle classes’ were already high,” it added.
On Bharti Airtel, Bernstein said the company had survived extreme “Darwinian competition” to emerge a highly-competitive market leader, while the number two Vodafone has the backing of a global giant.