Mukesh Ambani promoted Reliance Jio Infocomm, after buying the initial BWA spectrum in 2011, has increased the expectations of the mobile Internet users in India due to the hype it created over the last 12 months.
Since leading smartphone makers are going to offer Reliance Jio’s free 4G services as a bundle offer, India’s richest man can ensure that Reliance Jio Infocomm’s mobile internet business will reach the new buyers of smartphones in India.
Technology research firm CMR says tablet sales in India have revived due to demand from enterprise CXOs and 4G networks. Apple is one of the beneficiaries from the growth in Indian tablet market. Other tablet makers that target enterprise market are Samsung and Lenovo.
The promotional offer is expected to create spike in sales of smartphones in India. The total size of the Indian smartphone market is 27.5 million units of smartphones. India’s smartphone shipments in Q2 2016 rose 17.1 percent over the previous quarter and 3.7 percent over the second quarter of 2015, market research firm IDC.
Jio has maintained its position as the fifth largest smartphone vendor in the Indian telecom market with 12.3 percent sequential growth in Q2 2016
Jio 4G revenue predictions
A recent research note from Morgan Stanley says it expects the Jio 4G telecom services to grow to 40 million subscribers in the next fiscal (2017-18) and add $2 billion in revenues, with a positive cash flow by 2019-20. Reliance Jio has invested around $21 billion on 4G networks and spectrum.
This indicates that most of the free 4G SIMs offered by Reliance Jio, the latest operator to launch 4G services in India, will not be picked up by the Indian mobile Internet users. Bharti Airtel, Idea Cellular and Vodafone have 4G presence in India, while Telenor is doing 4G pilots.
Morgan Stanley says that Reliance Jio will have revenue market share of 2 percent in voice and 19 percent in data, leading to a 6 percent overall revenue market share. The Morgan Stanley report also indicates that the demand for voice offers from Reliance Jio will not be exciting for the 900 million plus Indian telecom users. Voice business is the backbone of the Indian telecom industry.
The ARPU predicted for Reliance Jio is Rs 300 per subscriber. This indicates that Reliance Jio will be dominating the high-end user market for mobile data.
The telecom research report also indicates poor response from Reliance Jio. “We have increased our cumulative project capital expenditure (Capex) estimate for Reliance Jio by over 10 percent, assuming spectrum spending of $1.5 billion in the coming auction. The 800 MHz and 1,800 MHz will be key bands of interest,” said Morgan Stanley.
Jio has garnered 20 percent data volume market share with free usage preview offer.
What rivals need to do
Meanwhile, JP Morgan Asia Pacific Equity Research stated that Bharti Airtel, Vodafone India and Idea Cellular need to take the lead to democratise and expand the data market in India.
CLSA says Jio will need to keep ARPU high, and attract a large subscriber base, to ensure reasonable returns on its $22 billion telecom Capex.
Bank of America Merrill Lynch expects Reliance Jio to offer unlimited VoLTE voice bundled with its data at around Rs 300 per month. Airtel India CEO Gopal Vittal recently said the company is not targeting to launch VoLTE at present.
Indian telecom infrastructure players such as Ericsson, Nokia, Huawei, Cisco and ZTE are expecting that Jio will make more investments in cell towers, small-cells to maintain VoLTE quality and Jio would need a fallback option for seamless telecom service, as it does not have underlying 2G or 3G network.
The main challenge for Jio will be offering high quality mobile Internet services and voice to 900 million mobile subscribers.
Baburajan K
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