Reliance Jio, India’s top telecom operator, has once again revved up its focus on the fixed home broadband market with new, aggressive low-cost plans with content bundling options to grow its subscriber base.
With the new plans, Jio is intensifying its push for higher revenue-generating premium customers ahead of the Indian Premier League (IPL) cricket tournament starting on March 31, which the telco will be streaming free of charge on its JioCinema app.
That move is likely to put pressure on arch rival Bharti Airtel and other fixed broadband players in India.
Jio’s new home broadband “Back-up Plan” offers a 10 Mbps connection and unlimited data for just Rs198 ($2.41) per month. That’s well below Airtel’s Rs 499 ($6.7) plan, as well as Jio’s own current base plan, which offers 30 Mbps for Rs 399 ($4.8) a month.
The Back-up Plan provides an option to upgrade the connection speed and add an entertainment package. As the name implies, the plan is positioned as a backup for existing service providers with unreliable connections, as well as drive new connections at an affordable price.
Jio – which has only 7.7 million FTTH subscribers as of December 2022 – has a target to reach 50 million FTTH connections. It doesn’t just aim to improve its home pass conversion, but also offer enterprise customers an affordable second service provider.
Airtel had 5.7 million subscribers at the end of last year, as per data from the sector regulator.
What Jio stands to gain
ICICI Securities said Jio’s new plan should boost its customer base, but the short-term revenue will be restricted due to dilution in ARPU. However, “the company will potentially benefit in the long run as customers appreciate the benefit of a converged digital ecosystem, and will be prepared to pay higher prices.”
JP Morgan, in its latest report, said that Jio’s cheaper fiber broadband base plan is targeted at acquiring new users from rivals. “This disruptive innovation at the bottom of the market will put pressure on Bharti Airtel and deflate ARPUs at the upper end of the market. Jio has ensured there will be no downtrading internally as the latest JioFiber base plan is only available to new customers with speeds also throttled at 10 Mbps.”
Morgan Stanley commented that Jio is increasing its focus on accelerating its market share gains within the industry’s incremental subscriber additions. “Jio’s initiatives targeting postpaid users (not diluting ARPU) and broadband users (dilutive to ARPU but may not be to revenue, depending on offtake) clearly show its increased focus on creating a more sticky user base.”
The new Jio plan also aims to disrupt the cable or DTH (Direct to Home) TV business at a time when cable users have seen a significant rise in cable bills and a drop in the number of channels.
The new plan by Jio offers more content (OTT + live TV) and fixed broadband data at largely pay-TV prices (bundled plans offered by LCOs). India has roughly 110-130 million pay-TV customers should be at 110- 130 million, and 30 million fixed broadband customers.
“The new plan will help migrate pay TV customers to a converged digital ecosystem. JioCinema (a product owned by Reliance Industries’ media business) will also start streaming IPL (most popular sports event in India) for free, and can provide a boost to Rs198/month plan adoption,” ICICI said in its report.
ICICI said Jio’s new plan is likely to impact Airtel’s DTH business and the latter needs to quickly match Jio. “Bharti’s DTH business will likely face disruption from Jio’s new FTTH plan, and it will have to launch competing services, especially as its DTH revenue / EBITDA was on a decline due to the fall in user base with a shift to FTTH.”
Jio is replicating its mobile gambit
Analysts at BofA Securities see Jio replicating its mobile strategy of facilitating transition at a very low cost. “In the mobile market, users first started using Jio as a secondary SIM and over time, many switched to Jio given better speeds/pricing. We think Jio is expecting a similar outcome as its aggressive broadband plan aims to target competitors.”
Jio’s home broadband push follows its recent pricing aggression around the mobile postpaid segment, which is led by Bharti Airtel and Vodafone Idea.
Notably, Jio’s move follows Airtel’s recent move to sweeten family postpaid offerings to counter Jio and ring-fence its high-value postpaid user base. Airtel recently matched Jio by launching an unlimited 5G data offer to all postpaid customers as well as prepaid ones on data plans of Rs 239 ($2.91) and above.
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