Media is buzz with various launch dates and data pricing about Reliance Jio Infocomm’s 4G LTE services. You should know that Ambani has always had the fascination for Media business and is filled with his agents across publications and TV channels. In this backdrop, will Jio launch with the Freedom Plan 2 weeks from now as claimed by some newspapers ? Well, I believe Jio will go for a Phase wise launch spanning over the entire FY 2016-17.
To differentiate itself, Jio is looking to launch packages with data-implied tariffs at least 25% lower than the current offerings of its top rivals. In the last couple of days, Airtel / Idea cut their implied data tariffs by 25-40%, thus pre-empting an aggressive data offering by Jio. This means Jio would now have to launch at an even more aggressive offering price, but, at the same time, not lose focus on high-end ARPU consumers.
My best guess is Jio is looking to offer “unlimited voice” as an offering on a Vo-LTE platform (and not a traditional circuit-switched platform) bundled with its data service. That way, Jio could offer a distinguished offering versus incumbents and have nothing to lose on voice (unlike incumbents, which have 80% of their voice revenue that could get cannibalized). However, we note that, currently, the VoLTE smartphone penetration is very low (<3%)
and in our estimate.
Mobile Data War
Jio could focus on offering more data at the same price rather than lowering ARPUs, as such a move would impact their ability to garner a return from its business. We expect incumbents to match Jio’s tariff by also offering more data at the same price. Such a move could lead to a “capacity war”, not a “price -war”. Among the incumbents, only Airtel is best positioned to handle higher capacity on its network, led by a capacity war.
Other Offerings from Jio
With limited VoLTE smartphone availability, we see a possibility that Jio could end up offering ultra-cheap handsets to drive uptake. While this may help Jio gain subs, we believe it would have more impact on the mid-to-low end, as not many high-ARPU subs would use the LYF brand phones. Also Jio has massive content library to bundle with its offering provided TRAI Net Neutrality restrictions don’t come its way.