CARE Ratings has revealed the revenue impact on rival telecom operators such as Airtel, Vodafone and Idea Cellular following Reliance Jio’s decision to extend free voice and data services on 4G network for 3 more months.
Earlier, Reliance Jio was planning to charge for its data services from 1 April 2017 after collecting Rs 99 for a life-time Prime membership. Reliance Jio last week said it received 72 million subscriptions during the Prime membership drive. During the free offer, Reliance Jio added more than 100 million subscriptions.
CARE Ratings says Reliance Jio’s Summer Surprise offer for its subscribers till June 2017 will put some pressure on the incumbent telecom operators.
Jio subscribers who buy Rs 99 prime membership till 15 April 2017 and subscribe to plans of Rs 303 or higher will be eligible for the Summer Surprise offer of free services till 30 June 2017. Subscribers need to pay minimum Rs 402 to get the free services till July 2017.
CARE Ratings said the surprise move by Reliance Jio will help in adding more subscribers to its base. After the month of July 2017, some moderation is likely in the number of telecom subscribers. This is because a very high percentage of the subscribers added by Reliance Jio are dual sim users and these users may surrender one of the connections once Reliance Jio starts charging for its services.
Earlier, CARE Ratings expected that Reliance Jio’s mobile subscribers may surrender one of the SIM connections from 1 April 2017 as Reliance Jio was to charge for its services from this date.
Reliance Jio has a subscriber base of 72.16 million users as of 31 December 2016, accounting for 76.9 percent of 93.74 million total subscribers added during the period April-December 2016. This is 128.7 percent higher compared to the period April-December 2015 when 41 million subscribers were added.
The new norm of bundled voice and data packages is expected to increase the ARPU of telecom companies in the coming years. However, any more surprises may put some pressure on the ARPU of telecom companies.
The total sales of nine telecom operators that grew in single-digit in each of the quarters during June 2015 quarter to September 2016 quarter declined 1.1 percent in December 2016 quarter. Mobile operators’ operating margin stood at 28.43 percent and net margin stood at 0.34 percent in the December 2016 quarter.
Jio revenue prediction
Meanwhile, consolidated earnings of Reliance Industries (RIL) would remain flat at best, since Jio should achieve PBT (profit before tax) break-even only by FY 2022 (2021-22), according to financial service company IIFL.
Reliance Jio will ramp up its market share to 22 percent, revenues to Rs 60,000 crore and achieve PBT breakeven earliest by 2021-22.
Reliance Jio will register a loss of Rs 19,600 crore in 2017-18 and Rs 11,500 crore in 2018-19.