Reliance Jio vs Airtel offers in unlimited 5G plans

The launch of cheaper postpaid plans with unlimited 5G by Reliance Jio has put rival Bharti Airtel on the back foot in the Indian market and may delay recovery in its key profit metric, JP Morgan analysts said on Thursday.
Kazakhstan mobile networkJio, the telecoms unit of Indian conglomerate Reliance Industries (RIL), launched new postpaid plans last week, starting from 399 rupees ($4.85) that included over-the-top (OTT) packages, forcing Bharti Airtel to roll out similar plans.

“We were surprised to see Bharti Airtel turn defensive with counter-plans,” JP Morgan analysts said in a client note. Unlimited 5G data consumption would delay any kind of 5G monetization, pressure the expansion of average revenue per user (ARPU) and delay 4G prepaid tariff increases.

Bharti Airtel’s family plans can drive ARPU drops of 100-200 rupees per subscriber and any subsequent price matching to that of Jio can drive further ARPU drops of 50-100 rupees per subscriber, the analysts said.

Stiff competition to attract 5G subscribers would reduce the pricing power for the operators and they will not be able to monetize 5G by charging a premium, they added.

Bharti Airtel’s ARPU expansion is at risk and could even reduce over 2024-25 as 5G price wars take place.

Meanwhile, Citi analysts said the introduction of 5G unlimited plans and enhancement of postpaid offerings by Jio indicates a renewed attempt by it to make inroads into the high-end postpaid & prepaid segments. Airtel has also launched similar plans.

This creates an opportunity for both operators to gain share from Voda Idea which is yet to announce its 5G rollout plans, as completion of its crucial capital raise is still pending completion, Citi analysts said in their client note.

While the market remains focused on tariff hikes in the dominant 4G prepaid segment, market share gains for Jio and Bharti Airtel should continue in the interim. Bharti Airtel should gain from its entry-level 2G tariff hikes (now extended pan-India) as well as from consistent organic mix improvement (2G to 4G upgrades).

Jio has hiked its entry-level postpaid plan by removing the earlier ~Rs200/mth (rounded up from Rs199) individual plan that was launched in 2018, making the ~Rs300/mth plan the cheapest in this segment. This compares with Bharti Airtel and Voda Idea’s postpaid plans, both of which start at ~Rs400/mth.

Jio announced new postpaid family offerings, viz. ~Rs500/700 for 2/4 sims (with no OTT content) and ~Rs800/1000 for 2/4 sims (inclusive of select OTT content). Bharti Airtel’s family postpaid plans now include ~Rs600/1000 for 2/4 sims (inclusive of select OTT content).

Vi’s key family postpaid plans are ~Rs700/1000 for 2/4 sims (inclusive of select OTT content).

Both Jio and Bharti have also announced unlimited 5G plans starting at Rs239/mth.

While Jio has met with limited success in the postpaid segment, the combination of family plans + unlimited 5G offerings could help it make inroads into the segment going forward. This could come at the expense of Vodafone Idea.

Citi analysts estimate the contribution of Vi’s B2C postpaid subscriber base to its revenues is ~12 percent, which equates to ~6-7 percent of Jio and Bharti Airtel’s mobile revenues.