Jio renews aggression to poach postpaid wireless subscribers from rivals

Jio to poach subscribers
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India’s leading telecom operator Reliance Jio is once again getting aggressive with its offerings to poach subscribers from rival telcos Bharti Airtel and Vodafone Idea. 

This time the 4G-only telco has altered its postpaid wireless strategy and has launched several new plans ranging from Rs 399 ($5.43) to Rs 1499 ($20.39)  bundled with various benefits to woo higher-paying subscribers. This comes after the reduction in broadband tariffs late last month.

Jio currently has less than 1% of its wireless subscriber base on postpaid plans.

Jio’s latest postpaid plans offer unlimited voice and data allowance ranges between 75-300GB per month along with free international roaming and Wi-Fi calling benefits. While certain plans will offer Netflix and Amazon Prime subscriptions for one year, all plans will offer a 1-year subscription of Disney+ Hotstar VIP. 

Reliance Jio’s new postpaid plans offer more content and come at 20% discount to Bharti Airtel. Jio’s new data pricing adjusted for OTT bundling appears to offer 50-33% lower costs as compared to prepaid plans of similar headline pricing and data limits, analysts said.

“We see limited risks to Bharti Airtel as it has managed churn well despite an 8-25% premium on prepaid and 50-60% of its postpaid subscribers. are from enterprises. 10% churn in postpaid subscribers could hit our fair value for Bharti by 2%,” Jeffries said in an analysis note.

India is largely a prepaid market, with 95.5% of the subscribers on prepaid plans. However, postpaid is a premium segment, accounting 20-25% of mobile revenues of Bharti Airtel and Vodafone Idea and is also less prone to churn. 

Over FY16-20, India’s postpaid market has halved to Rs 221 billion ( $2.99 billion) and forms 15% of sector’s revenues and 5% of the sector’s active subscribers. The decline has been driven primarily by a 42% fall in postpaid average revenue per user (Arpu) to Rs357 ($4.85)  on the back of sharp fall in prepaid pricing. Since 50-60% of these subscribers are enterprise customers, 34% of postpaid subscribers are situated in the three metros and another 36% in urban-centric A-circles. 

“We think Jio, after attaining market leadership in the prepaid segment, is now focusing on the postpaid market, as it looks to improve its ARPU (and thereby revenue) trajectory,” Credit Suisse said in a report.

Among operators, Vodafone Idea has the highest 43% market share followed by Bharti Airtel at 28%.

This is Jio’s second attempt at postpaid and is well-timed to target potential churn among 23 million postpaid subscribers of Vodafone Idea, analysts said.

Vodafone Idea, which recently rebranded to Vi, has the most to lose from a churn in this base.  Analysts said that Vodafone Idea’s ongoing network integration exercise has caused bad experiences in some key services areas which may result in higher churn in the postpaid segment as customers now have more options available. 

“Bharti Airtel’s network coverage and digital engagement is stronger than Vi, suggesting its premium subs are less vulnerable to churn,” JP Morgan, separately said.

JP Morgan added that Jio’s latest plans will help subscribers move to higher-ARPU plans based on consumption and greater market segmentation. “This could help change the architecture of premium subscribers to postpaid that can help overall industry profitability,” it added.

Even as any major impact on Bharti Airtel’s postpaid base is unlikely, analysts believe that the Sunil Mittal-telco could look at sweetening its postpaid offerings by bundling more OTT services similar to what it did with broadband plans recently by matching Jio’s new offer of unlimited data. 

“We do not expect much subscriber churn risk to Bharti Airtel’s existing postpaid customer base, given its premium brand positioning and lower churn in this segment. That said, Bharti Airtel’s effort to convert its prepaid customer base to postpaid may witness challenges with the increased competition from Jio,” Credit Suisse said.

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