Reliance Jio's new tariff plans are an effort to improve profitability and thus a positive for the telecom sector that has been hit badly due to aggressive play by the new entrant, says a report.
"After amassing over 120 million subscribers, RJio is now focusing on pushing up the Arpu (average revenue per user) to improve its profitability," rating agency Icra said today.
The agency said the plan revision done yesterday is a positive for the sector as it points to a lifting up in tariffs and upping Arpu. The new plans are "attractively priced" for the subscriber and will "keep competitive intensity for the industry elevated," it added.
For the first six months since its September 2016 launch, RJio services were free, which impacted the sector very adversely with telcos reporting losses or dip in profits.
After the free voice and data offerings ended on March 31, it came out with its maiden paid-for plans with the one offering 1GB of free data per day for 84 days by paying Rs 309, which translated into an Arpu of Rs 96, being the most popular, Icra said.
"These plans were offered to consolidate the healthy subscriber base, which the company had amassed during its free offer period," it said.
The most prominent of the revised plans is Rs 399, which offers 1 GB per day of 4G data and unlimited calling for 84 days, which will increase the Arpu to Rs 124.
"Thus the new plan points towards an uptick in Arpu, although it still remain lower than prevailing industry Arpu wherein Bharti Airtel reported Arpu of Rs 158 for Q4FY17, Vodafone at Rs 142 and Idea at Rs 142," it said.
The report added that this indicates easing on the Arpu pressure for telcos, even though the competitive pressure for the industry will continue to remain high.
The agency said the Mukesh Ambani-led company is now moving towards a "balanced approach" between subscriber addition and revenue growth as the active subscriber addition has slowed down to 0.37 million in April.