Reliance Jio's broadband offers won't impact wireless tariff growth

Reliance Jio is expected to start monetising its fibre services, which have been offered without any free service period, much earlier than it did with the wireless business. Analysts, however, do not see this effort offsetting slowdown in its wireless revenue growth and any hike in tariff in telecom wireless services is not expected before end of 2019-20 (FY20).

“Jio has announced a no-upfront free period for fibre services, and so this segment is likely to start contributing revenues for the company in FY20 itself,” wrote Manish Adukia, analyst Goldman Sachs.

However, Jio’s non-wireless services are unlikely to be able to meaningfully offset any slowdown in wireless revenue growth as the prices are largely non-disruptive. As a result, analysts continue to expect tariff hikes in wireless towards end of FY20. The absence of bundled plan announcements for Jio wireless users, the firm’s lowering of target customer base from 50 million to 20 million homes, and a stress on more cost-effective long-term plans hint towards a slow and steady growth plan for the service. 

Jio’s wireless launch in 2016 had created enough disruption in the market to shut down smaller telecom operators and push the larger incumbent operators into mergers. The launch was accompanied by almost a year of free services and discounts on data and voice usage.

Jio’s wireless average revenue per user (ARPU) is the highest in the market even as incumbents Airtel and Vodafone Idea are coming back on track. Consequently, industry watchers have been confident that wireless tariffs will stabilise by the end of FY20, especially since Jio is likely to reach its target base of 400 million subscribers by then.

“While Jio will gain share, JioFiber is unlikely to expand the broadband market from current 18 million households as pricing has not been lowered meaningfully,” noted Deepti Chaturvedi, analyst, CLSA. Also, relative customer stickiness in the broadband space due to higher service and maintenance would mean that users won’t jump ship to a different operator overnight.

However, market share shifts are likely with Jio gaining share, especially from operators like BSNL, with the lure of faster speed assuming they can match BSNL’s reach. At the same time, while Jio’s Bronze plan is competitive, its Silver and Gold plans are comparable to Airtel and, hence, offer limited scope for customers to downtrade. While Jio’s plans are 13-23 per cent cheaper in absolute terms, its data allowance is 20-40 per cent lower, due to which JioFiber is effectively 8-27 per cent costlier than Airtel.