Reliance Jio to turn profitable sooner than expected?

Mukesh Ambani CMD, Reliance Industries earlier this week unveiled plans to start charging current 100 million and new customers for using 4G data at Reliance Jio networks. 

Ambani also announced launch of Jio Prime Membership, a loyalty program, that will offer unlimited benefits to existing customers of ‘Happy New Year’ offer till March 31, 2018. The company also said that customers would be required to pay a nominal one-time enrollment fee of Rs 99 and an introductory plan of Rs 303 per month to avail of the benefits.

Also Read: How Reliance Jio's Plans stack up against Airtel, Vodafone and Idea

Industry experts have estimated RJio’s average revenue per user to be anywhere between Rs 200 and Rs 260.

India Ratings analyst pointed out, “…the tariff plan under its Prime Membership Programme of Rs 303 per month per subscriber generates an ARPU of Rs 260 (net of taxes), which is higher than the industry-blended ARPU (Incumbents blended ARPU of Rs 190 and data ARPU of Rs 150).”

“Our current FY18 revenue and EBITDA estimates of Rs 201 billion (20,100 crore) and –Rs 18.5 billion (18,500 crore), respectively, factor in nearly 100 million subscribers and ARPU of Rs 200,” Aliasgar Shakir and Jay Gandhi analysts from Motilal Oswal said in a report dated February 21.

Its strategy of gaining market share was simply to reel people in with the bait of free data and voice calling and eventually when customers get used to cruising the internet at high-speed then start inputting minimal charges.

“RJio’s strategy clearly targets the high-end consumers of other dominant industry players,” Ind-Ra analysts said.

In an earlier report by Zeebiz we had said that from its Jio Prime scheme alone, if RJio garners five crore from its existing 10 crore users it would earn Rs 495 crore (Rs 99 x 5 crore users) and Rs 18,180 crore (Rs 303 x 12 months x 5 crore users) from the Rs 303 tariff per month for a year.

 “We believe nearly 30-40% subscribers could churn out as RJio starts charging users. With incremental additions in FY18, our subscriber estimate remains unchanged for that year. We keep our ARPU estimate unchanged at Rs 200, as 60-70% subscribers have ARPU cap of Rs 303, while rest of the subscribers (including voice consumers) could have lower ARPUs,” Motilal Oswal analysts said.

Apart from free voice calls, Jio will also provide data tariff plans, which would range from Rs 149 to Rs 4999 for its long term plans.

Stating that RJio will capture 99% population by end of this year, Edelweiss analysts -Sandip Agarwal  and Pranav Kshatriya said, “We believe, RJIO’s Rs 303 tariff offering unlimited voice and 1GB per day data provide meaningful value for subscribers versus Bharti’s average 419 minute voice and 0.97GB per month data and Idea’s 385min voice and 0.70GB per month data.”