Bharti Airtel, Vodafone, and Idea Cellular have reasons to worry as analysts believe the unlimited Rs 303 per month data plan for Reliance Jio prime members with free voice is expected to dent the premium subscriber base of the sector. (Jio is a relatively new telecom player.) The impact on revenue of the sector is estimated to be up to 17 per cent, assuming that premium data subscribers pay an average of Rs 600 per month, according to analysts at Motilal Oswal Securities. While there are 350 million data subscribers in the sector, 100 million are in the premium category.
Analysts say if average revenue per user (Arpu) goes down from Rs 550 to Rs 303 per month, the sector will be impacted by Rs 30,000 crore a year. The larger players will be affected more as their Arpu is much higher than the Rs 303 rate of Jio.
Out of Airtel's overall subscriber base of 266 million, 55 million are data subscribers who pay data Arpu of Rs 174.7 per month. Vodafone and Idea have a data subscriber base similar to Airtel's and have data Arpu of Rs 111-118 per month each. Operators do not tell proportion of premium subscribers.
The impact could be partly offset: While premium subscribers could be paying Rs 500 per month or above, some in the Rs 200-300 range may want to upgrade to the unlimited offer. Thus, the net impact on revenue could be 8-10 per cent, say analysts.
The other impact would be in the voice space. Analysts at Edelweiss Securities say with the launch of 4G-feature phone expected soon, Jio will be able to win subscribers from rivals, especially in the rural segment, which will be a negative for Idea Cellular. "Jio's Rs 149 package offering unlimited voice along with handset priced under Rs 2,000 will be attractive to consumers," the analysts say. This will increase Jio subscriber base and cut its termination costs.
The end of freebies is a positive for the sector as operators can now plan their response and long-term strategy. Currently, Airtel's unlimited post-paid plans start at Rs 549, which includes unlimited voice and 6GB data. All operators will have to change strategies to match Jio's attractive offer. This will put pressure on their data Arpu. This is likely to lead to further pressure on Arpu and subscriber acquisition costs, according to Edelweiss Securities analysts.
While stocks of Airtel and Idea Cellular are in the green, given that telecom market uncertainty has come to an end, the battle has just begun.
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