Reliance Jio hurting from Airtel, Vodafone competition? See what analysts say

Reliance Jio (RJio), which disrupted the telecom sector with its pricing, is also prone to the heat of competitive intensity prevailing in the market, according to analysts. Based on the fourth quarter numbers, RJio is no longer insulated from competition and any rise in the same would hurt it equally or probably more than the incumbents, ICICI Securities said in an analyst note. RJio’s revenues rose 3.6% quarter on quarter (QoQ) to about Rs 7,100 crore while non-prime membership revenues grew just 0.2% to Rs 6,380 crore due to a price cut announced in January this year. However, the growth in revenues slowed down sequentially from 11.9% seen in the December quarter. “This indicates RJio is no more insulated from competitive intensity and will be impacted equally or even more than the incumbents henceforth. Though, RJio still continues to outperform incumbents who have reported decline in revenues,” the report said. 

UBS, in another analyst note, echoed similar views and said RJio is not immune to sector competition now. Many analysts have similar views on the RJio’s focus on offering higher value to consumers over short-term revenue recovery or hike in average revenue per user (Arpu). UBS said, “The company expects revenue growth coming from subscriber growth and higher value to customer. Jio will continue to invest and bid aggressively for content as it sees content as a key differentiator.”

In another analyst note, Bank of America Merill Lynch said RJio’s primary focus remains on subscriber additions over Arpu hike. We do not see the company in a rush to raise Arpu. “Jio intends to keep its tariffs at a discount to peers and would react to competitor offerings. Jio also implied that if its competitors raise tariffs, it would follow.”

Besides, it is unlikely that industry will witness a tariff hike for the next three to six months as both RJio and Bharti Airtel are likely to focus on poaching customers from Idea/Vodafone as they begin their integration shortly.

RJio is also exploring other means for monetisation such as advertisement, as content monetisation would be more gradual as subscribers are getting used to such services. Tariff cuts in the January-March quarter by Reliance Jio led to a decline in its Arpu by 11% to Rs 137.1.

The company had reduced its base tariff plan for JioPhone users at Rs 49 per month while JioPrime membership was extended by a year for free.

However, the dip in Arpus came along with a strong addition in the subscriber base during the quarter at 26.5 million.

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The telecom sector has been witnessing severe pricing wars triggered by the entry of new player Reliance Jio, owned by Mukesh Ambani.