India’s top telecom operator Reliance Jio Infocomm is replicating its wireless strategy to grow its fixed broadband business and to take on its arch-rival Bharti Airtel, which has also been making efforts to capitalize on demand led by the pandemic.
Analysts said that the pandemic has resulted in a “customer pull” for fixed broadband connections which is required for work from home (WFH), Study from Home and Entertainment from home.
Jio had earlier this week revamped its broadband offerings and is now offering its basic plan at just Rs 399, which will help it gain new users in non-metro areas, analysts said. Jio is offering for the month long trial at Rs 399 with an option of free return.
This affordable strategy revolves around gaining users by offering lower tariffs than peers and over time monetizing other avenues like digital ad and subscription, they added.
“Jio’s new Rs399 plan is a potential game changer in our view, as it can increase adoption of fixed broadband in India with Jio scaling its network reach,” Credit Suisse said in a note after the launch of new Jio plans.
BofA Securities, in its analysis, said that Jio’s move to revamp JioFiber broadband plan is a change from original strategy. Under its original strategy, the telecom operator was offering the same price points as competitors like Airtel but was offering better value through bundling of IoT, AR/VR services and devices.
Analysts said that the new “value for money” packs are expected to drive adoption of JioFiber services in smaller tier 2 and 3 cities.
Jio has claimed that it has connected 1 million homes and businesses with its fiber service. It is aiming to connect 50 million homes and businesses in the coming future.
“We also consider fiber broadband uptake to be a secular trend in India given the customer pull as well as the telco push from both Jio/Bharti to expand in Tier 2/3 cities,” BofA said in its analysis.
Analysts at both the brokerages said that the uptake in gaming, health-tech and Ed-tech along with over-the-top entertainment streaming services will help Reliance Jio garner more eyeballs.
“This will help Jio in better digital ad revenues along with subscription revenues,” BofA said.
While the basic Rs 399 JioFiber plan doesn’t offer access to any content service, Rs 999 and Rs 1499 plans offer free bundled access to up to 12 OTT entertainment apps, including Netflix, Disney + Hotstar and Amazon Prime Video.
Analysts now expect Bharti Airtel is now expected to slash prices of its fixed broadband plans to match Jio’s prices in India. Airtel’s plans are 15% costlier than Jio’s new broadband plans.
BofA Securities said that Airtel may now be forced to respond to price cuts to maintain its own momentum, which is marginally negative for the company as it may cannibalize its current broadband revenues.
“Bharti Airtel should also benefit from increased adoption of fixed broadband given its network presence…we note that Bharti Airtel’s current broadband plans are now not competitive to Jio, as some of them are ~15% premium to Jio’s new plans along with lower data allowance compared to Jio,” Credit Suisse said in a note.
Credit Suisse said that Airtel may also need to offer more bundled OTT streaming subscriptions besides offering unlimited data plans to be able to better compete with Jio.
Airtel recently revealed that it is forming more partnerships with local cable operators to expand its home broadband services. These partnerships are aimed at increasing broadband penetration in smaller towns.
“We are now live in 14 such cities through this partnership model,” Airtel chief executive Gopal Vittal said during Q1FY21 earnings call.
With the help of a push by both Jio and Airtel, India’s broadband subscriber base is expected to grow at 11% CAGR over the next five years as compared to 4.5% CAGR in the last five years.
Credit Suisse, in its analysis, this 11% penetration growth will be mainly led by Jio’s subscribers.
Be the first to comment