Reliance Jio launch may be pushed to December

Company waiting to fix 'blind spots' in the network before national rollout

Reliance Jio might delay the launch of its much-awaited mobile broadband service (4G) to the end of this year. Analysts and people in the know say that a large-scale rollout is expected to happen only in December as the network is yet to stabilise and there are several 'blind spots' that the company needs to fix. Sources say voice-over LTE (VoLTE) is also proving to be a challenge now. Jio will offer voice service over its LTE (long term evolution), unlike existing telecom operators that offer voice service through circuit switching. A query sent to the company on the same remained unanswered.

Bank of America Merrill Lynch, in a report dated March 21, says: "Despite completing an employee soft launch in December 2015, we do not yet have visibility on the timeline on commercial launch by Jio. In our recent meetings with industry participants, we found a consistent view coming out of risks of Jio launch being pushed to December 2016."

The brokerage has put out two possible scenarios. First, Jio might start a phased launch from June onwards giving it more time to respond to challenges it might face in the 850 MHz handset ecosystem. The second scenario factors in a large-scale launch in December. Sources close to the company say the network is taking time to stabilise and a few more months would pave the way for a 'flawless service'.

Some analysts also attribute the delay in closure of the deal between Reliance Communications (RCom) and Sistema Shyam TeleServices (SSTL). The rationale is that Jio needs access to spectrum in the 850 MHz band to launch services, as sub-1 gigahertz band has better propagation capability.

In a note dated March 22, IIFL Institutional Equities says, "Considering the likely timelines of the RCom-Sistema merger, and initial trial reports of Jio's VoLTE offerings, a full-scale 850 MHz-supported launch by Jio is likely by December." VoLTE is proving to be more challenging than initially thought.

The brokerage is of the view that getting spectrum in the 850 MHz is vital for Jio's chances, as it will give it a more consistent coverage than 1,800 MHz or 2,300 MHz.

The assumption being made is that the delay in the conclusion of the RCom-SSTL deal will push back the launch.

However, this might not hold true entirely as Jio already has a spectrum-sharing deal in place with RCom, which has adequate spectrum in the 850 MHz band. Between Jio and RCom, there is at least 10 MHz bandwidth available in 10 service areas. In 17 service areas, Jio has entered into a sharing deal with RCom. In nine circles, Jio has spectrum in the lower frequency band. Additionally, the shareholders of RCom and SSTL have cleared the merger in March. The deal now needs to get the approval of Rajasthan High Court and the Bombay High Court, after which it will need to go back to the Department of Telecom. The process might not take more than two months, say experts.

The delay could be a negative for the company's stock, which could see some downwards revision in earnings. The Street has been factoring in higher earnings following the commercial launch of the service at the start of the new financial year in April. With a large-scale launch being pushed back, earnings estimates will be revised downwards.

The delay will also give other telecom players to consolidate their position in the market.
WAITING GAME

Jun 2015: Mukesh Ambani talks of launching commercial operations by year end

Target: 100 million subscribers within 100 days of launch

Dec 2015: Signs spectrum sharing and trading deals with brother Anil Ambani

Dec 2015: Launches services for employees

Dec 2015: Analysts get to test Jio's network and services

Mar-Apr 2016: Expected period of commercial launch announced by brand ambassador Shah Rukh Khan

4th quarter 2016: Analysts say commercial services unlikely to be launched before Q4