The latest JioPhone offer is unlikely to give any major headache to its rivals as the high upfront commitment may not result in any major subscriber churn, says analysts.
Reliance Jio Infocomm (Jio) has announced a offer that bundles the JioPhone device and two years of unlimited services for Rs 1,999 and Rs 1,499 for one year as part of its ‘‘2G-mukt Bharat’’ plan through affordable services. This will come along with 2GB data every month.
Through the latest offer, Jio is targeting 300 million subscribers in India who it says are ‘‘trapped’’ in the 2G era and unable to access basic features of the internet. The latest offer will be available from March 1.
According to the company, 2G customers spend about Rs 5,000 over a period of two years which include a total recharge of Rs 3,600 and a feature phone in the price range of Rs 1,200-1,500 a unit. It pointed out that feature phone users also pay Rs 1.2-Rs 1.5 every minute of voice call and Rs 45-50 every month to keep their connections active.
However, brokerages feel that its offer will not lead to any major disruption though it may lead to some uptick in the company’s subscriber base.
‘‘The new annual JioPhone tariff plans are unlikely to change the competitive dynamics of the industry, given a minimum upfront commitment of Rs 1,499 (including device), an amount more than twice what a 2G feature phone customer typically spends upfront (on device plus initial recharge),” Goldman Sachs said.
“Lower effective monthly tariffs by subscribing to longer duration plans has been a regular feature of telco pricing strategies for a long time. However, most consumers still remain on 1- to 3-month plans as the churn on prepaid is quite high, and the Indian consumer’s ability to make lump sum payment remains low,’’ Goldman said.
Analysts at Credit Suisse also said the new plan requires higher upfront investment and, considering that the target segment is price sensitive, it may not convert a large proportion of this segment. At present, new user has the option to buy JioPhone for Rs 699 and opt for monthly recharges of Rs 75 or Rs 125, they added.
They added that there will be a limited impact on Bharti Airtel as the Sunil Mittal led telco could offset any negative impact from JioPhone through market share win from Vodafone India.
The brokerage estimates that JioPhone has a base of around 120 million devices as of December 2020, thereby accounting for 29 per cent of Jio’s subscribers. It added that in the previous fiscal, Jio added 20 million subscribers a quarter on an average, it feels that JioPhone contributed more than 50 per cent. However, in this fiscal, Jio’s subscriber net additions have been down to 7 million a quarter which is a function of lower JioPhone adds. RIL had attributed this slowdown in JioPhone adds to certain supply-chain issues in 2020.
