 "Reliance Jio")
Launch of Reliance Jio services will hurt incumbent operators and the free voice offer will be a game changer, as data offerings announced by the latest entrant are not so different from what is being given by others, say analysts.
As VoLTE smartphones gain traction, incumbents will have to come out with bundled packages and launch their own VoLTE offerings to retain customers, they say. Currently, 70% of operators' revenue is from voice.
Executives at existing operators say they will see what impact Jio's free voice offer makes and then decide on strategy, in a couple of weeks. Rates for both voice and data are set to fall further but by what extent will be decided after watching the market dynamics.
"In our view, incumbent telcos would not aggressively match Jio's offering but try to be at a mild premium to Jio, thereby providing some space for Jio to gain market share," Bank of America Merrill Lynch said in a report.
A sector executive said with Jio finally announcing its commercial launch, the picture is much clearer and they could now frame a strategy to counter the competition. He said it would not be so easy for Jio to add customers, as data growth had already slowed and new customers would have to make a one-time investment of at least Rs 3,000 to avail its service.
At the launch of 4G services in Gujarat, Vodafone India managing director Sunil Sood said pricing was not going to be a differentiator. "Pricing is the easiest thing to change. It is not a barrier to entry (in 4G). We will continue to remain competitive," he said.
An executive at another telco said there were about 150 million smartphones users in India, of which 68 mn use 4G phones and around five mn had VoLTE-enabled phones. Enabling VoLTE on existing handsets is not an issue; Jio has been in touch with handset makers for this.
A majority of data customers at existing operators are either using 2G or 3G; 4G is still gaining traction. Analysts expect Jio to expand the data market and data revenues would grow at a 22% compounded annual rate over the next few years.
It is the free voice which is exoectede to lure a majority of customers towards Jio. "RJio announced its tariff (rate) plans starting at Rs 149 for 28 days, offering unlimited voice. Although this is higher than the voice average revenue per user (Arpu) of Bharti and Idea, at Rs 138 and Rs 130, respectively, it will attract users due to the peace of mind provided by an unlimited offering," said financial services entity Edelweiss.
With the allure of unlimited voice and free usage till December, it expected subscribers to throng RJio's network, impacting incumbents' growth. "Assuming a 5% impact on FY17/18 estimated revenues, we expect a 11% and 7.4% Ebitda (operating earnings) cut for Bharti Airtel and Idea Cellular, respectively," it added.
An analyst said for the incumbents, there would be an impact on the lower-tier segment, as the Rs 149 offer by Jio would appeal to voice-only customers, who will be able to make unlimited free voice calls.
UBS in a report said RJio, being a 4G operator, would find the addressable market only around five% of India's mobile users. "Also, we do not expect high-end customers to switch to RJio overnight, abandoning their existing operator," it added.
