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Reliance Jio offers: Mukesh Ambani’s telco to keep freebies flowing, say analysts

On March 31, while announcing that 72 million subscribers had opted for its Prime offer, Jio said that it was not only extending the membership drive till April 15, but also sweetening the deal.

Rishi Ranjan Kala

Reliance Jio Infocomm (Jio), which came with a Summer Surprise offer last week, that caught incumbents off-guard, would continue to come up with more such offers as the year passes by. Analysts feel that Jio will continue to disrupt the market with such offers even though it has begun charging and the move would create pressure on the incumbents. “Subscribers are the biggest beneficiaries. They are continuing to get good offers. Either the existing operator is reducing prices or if they (subscribers) are comfortable enough, most of them have subscribed to Prime,” Tanu Sharma, associate director for large corporates at India Ratings and Research (Ind-Ra) told FE. She said that Jio’s Summer Surprise offer has caught its rivals ‘off-guard’ as ‘everybody accepts that it (Jio) has come up with a pricing which is above industry average revenue per user (Arpu), so things are likely to be better’. The industry Arpu is in the range of `130-140.

On the company continuing with freebies Sharma said, “Jio has taken more time to protect its customer base because suddenly if you convert anything from free to priced, there could be a churn. I think that was what maybe happening, which made them extend the offers.”

On March 31, while announcing that 72 million subscribers had opted for its Prime offer, Jio said that it was not only extending the membership drive till April 15, but sweetening the deal, announcing that those who purchase the `303 plan in the next 15 days will enjoy 1GB data per day and free local and STD calls till June. Cellular Operators Association of India’s director general Rajan S Mathews feels that the industry will respond to Jio’s latest offer in order to ensure that their subscribers can stay with them.

Ind-Ra’s Sharma said, “I think FY 2017-18 will be difficult for the sector as Jio may continue to disrupt. So whatever they have come out with plans are only indicative and could be changed in view of consumer behaviour. So they may continue to be disruptive for 1 to 2 years, I would say. How much disruptive, depends”. Brokerage Morgan Stanley in a recent report also expressed similar views. It believes that Jio will remain disruptive for the next 12-18 months.

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“Since the launch of its paid plans, RIL has tried to lock in higher revenue customers with prime membership as it capitalises on its brand new network and offers nearly unlimited monthly data plans. The extension of free offerings is another step in that direction attracting customers to make its network primary network (and not secondary),” it added.

Similarly, Goldman Sachs too in a recent report said, “Also, given a number of extensions of free offer period by Jio, we do not rule out the possibility of future price cuts or more discounts by Jio to retain customers”.
Deutsche Bank said that it believes rival operators would make comparable offers to their high-value subscribers even at the cost of short-term revenue loss to counter Jio.

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