Reliance Jio, Bharti Airtel and Vodafone Idea I The battle rages - check the latest update

Reliance Jio’s new Jio Phone 2021 offer targeted to upgrade 2G user base may be beneficial at the margin only despite its attractive proposition, as higher upfront outlay may be a deterrent for incremental customers. Nevertheless, it may help Jio in retaining JioPhone subscribers and perhaps arrest the recent increase in churn rate. Impending ARPU uplift for the larger 4G smartphone base could be a mutually exclusive decision to Jio’s targeted strategy.

This may help Jio in completing their three years of commitment, as they get an economically beneficial annual recharge plan of Rs 749 instead of the current minimum cost of Rs 977 (at Rs 75 for 28 days) for a similar unlimited offering. At the margin, it may also allow Jio to gain new lower-end customers, who may have the ability to pay higher upfront charges in lieu of an upgrade to unlimited voice and data connectivity.

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This will pose another challenge for Vodafone Idea, as it continues to lose subscribers; Bharti Airtel may have a limited impact, as it continues to gain ground on the larger 4G smartphone user base in recent times. Kotak Institutional Equities doubt if the other operators will resort to providing a bundled device given their stated strategy/philosophy of limited gains from handset subsidy and leveraged balance sheets.
ARPU uplift for 4G smartphone user base could be mutually exclusive to Jio’s targeted strategy:

Kotak Institutional Equities remain hopeful for now on impending tariff hike for the larger 4G smartphone subscriber base, which is desirable to improve the industry economics. Jio’s focused strategy to target specific user segments, such as postpaid through OTT package, feature phone through bundled devices and new smartphone customers through an entry-level device with Google (later this year), can all be seen as mutually exclusive events to the required tariff hike for the smartphone subscriber base. Kotak Institutional Equities do see a unique challenge though as collectively all the players desire and require higher ARPUs in the medium term, even as no one seems to be willing to bell the cat and initiate it for now. A policy intervention, not the best option, seems to be the only way out.