Relience Jio may be India's top leader in market by 2021- Analysts
By MYBRANDBOOK
The highly pronounced Indian mobile network operator Relience Jio Infocom Ltd., Owned by Reliance Industries and headquartered in Navi Mumbai, Maharashtra, could reach the leading position in India on a revenue basis by 2021 and on a subscriber basis by 2022, given its current rate of ongoing customer acquisition, Sanford C. Bernstein & Co. analysts Chris Lane and Samuel Chen reported today.
Jio, as per the agency, will continue to add significant customer numbers as they continue to subsidise their JioPhones. Jio launched a free-for-life call service last year that triggered a price war and consolidation in one of the world’s most crowded mobile markets and it has consistently been adding 6 to 10 million new active customers per month (as measured by the VLR), roiling the world’s largest telecommunications sector after China’s. Most of these additions are due to customers taking a highly subsidized JioPhone. These customers are mainly located in rural area, as evidenced by Jio's market share growth in 'B' and 'C' circles. The ensuing disruption forced smaller operators to quit, merge or go bankrupt. Newly merged Vodafone Idea has toppled Bharti Airtel to become India’s top operator, while Reliance Jio has quickly added subscribers to gain the No 3 spot.
Both Bharti and Vodafone management have indicated they do not believe in handset subsidies for pre-paid users.
Bernstein on his report, added that, it is assumed Jio’s to keep selling its subsidized JioPhones, 4G phones it sells for a refundable deposit of $23, until it reaches the No 1 position. Bernstein said average revenue per unit would probably rise for Bharti Airtel and Vodafone Idea this year as they cancel user contracts that generate little revenue. The research firm does not expect 3G/4G pricing to start to creep up until 2020.
Bharti Airtel recently disclosed 100 million customers currently spending less than Rs 35 per month. "We estimate this number for Vodafone Idea at ~150 million. Assuming 20% of these customers to exit or leave the operators, would result in Bharti losing ~20 million customers and Vodafone Idea losing a similar ~30 million. These customers will also be unable to meet the lowest recharge requirements for Jio, meaning they will either exit the market or migrate to BSNL/MTNL," analysts said.
The loss of low-value customers will help increase ARPU. "We estimate ARPU based on three cohorts – 3G/4G users, 2G voice and data users, and 2G voice only users," they said.
The introduction of the new Rs. 35 minimum will only impact the 2G voice only users – lifting this cohort from Rs ~20 at present to around Rs 35. This, plus the loss of lower end subscribers, should result in the average blended APRU for Airtel increasing by 12% to Rs 113 and for Vodafone Idea seeing their ARPU increase by 14% to Rs 101, as per the analysis.
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