KOLKATA: Airtel, Vodafone and Idea are likely to bear the brunt of a potential 16-17 per cent fall in telecom industry revenues in FY18 if newcomer Reliance Jio’s Rs. 303 per month ‘Prime’ offer finds maximum traction from next month, analysts and sector experts said.
The price-value equation of Jio Prime offer of 28 GB data at 4G speeds with unlimited voice calls to any network is the best in the market, and incumbent carriers would do well to closely match it, they said. Brokerage Kotak Institutional Equities even warned that it would be “foolhardy for incumbents to assume they can command material pricing premium in the marketplace versus Jio”.
Kotak estimates “a potential ceteris paribus negative impact of around 16-17 per cent on industry revenue in FY2018” if Jio’s Rs.303/month offer appeals to customers with total monthly wireless spends of Rs. 200 or more. But it noted that the estimated dip in industry revenue could be restricted to 8-10 per cent if there is “ARPU sanity in the sub-Rs.200 segment of the market”.
Experts agreed that market share gains in the lower end of the market would restrict potential revenue declines for incumbent carriers in 2017-18.
But Kotak estimates that even a 10 per cent dip would see the country’s telecom industry revenue in FY18 reduced to Rs. 1,57,200 crore from an estimated Rs.1,74,000 crore in FY17.
Brokerage Credit Suisse, however, feels market leader Bharti Airtel will match Jio’s paid offers, going forward.
“While it didn’t make sense to match Jio’s free offer, we believe Bharti has decided that it will not hesitate from matching Jio’s paid offers,” the Swiss brokerage said.
Bharti Airtel chairman Sunil Mittal recently told at the Mobile World Congress that Jio’s rates are still unsustainable.
Airtel is already reckoned to have unveiled two super aggressive bundled plans at Rs.145 and Rs.349, both offering a generous 14 GB of 3G/4G data over a month, sweetened with unlimited voice calls, primarily aimed at retaining upper-end customers. Idea Cellular, too, has reportedly countered Jio Prime by unveiling a Rs.348 bundled plan, offering 14 GB of data over a 28-day span with unlimited voice calling.
A senior industry executive said incumbent carriers are more likely to “selectively match Jio’s Prime offer” to hold on to upper-end subscribers or those threatening to port out.
Analysts at Kotak said it was time incumbent carriers took a leaf out of Jio’s limited commercial history in the market, and treated all customers (in the same ARPU bucket) the same in terms of value offered.
What’s more, the brokerage feels “loyal customers have been short-changed a tad by the industry” historically.
“Some of the largest corporate customers of incumbents have not seen rates go down or data allowance go up since Jio’s launch, even as customers intending to port out and new users have seen a significant improvement in the price-value equation,” analysts at Kotak said in a note seen by .
The brokerage feels incumbent carriers have for long chased new customers with “materially superior price-value offerings than what old customers are getting,” and have also offered substantial retention benefits to customers who have expressed an intent to port out.
Another industry executive warned that incumbents could well end up paying a heavy price for not doing enough proactively to ring fence upper-tier customers since Jio’s entry last September. According to him, most incumbents have essentially focused on holding on to prepaid users by offering discounts, instead of taking proactive steps to retain top-end users who might now find the price-value equation of Jio’s Prime offers more exciting.