Telecom sector: Reliance Jio stokes change of plans

Newest telecom operator in the country claims to offer the lowest data rates in the world at less than a dollar per GBJio says that despite it being an LTE network, there would be no depletion of data when its consumer makes a voice call. (Illustration: Subrata Dhar)

From September 5, the much-awaited Reliance Jio will be launched for public subscription, and its parent company Reliance Industries Ltd’s chairman Mukesh Ambani, on Thursday promised that the services will remain free until December 31, as part of its introductory offer. Jio claims to offer the lowest data tariffs in the world at less than a dollar per gigabyte, compared with an average $3.5 per GB currently offered by other telecom operators in the country. But a closer look reveals that Jio’s data plans — given the information offered so far by the company — do not deviate significantly from what operators are currently offering.

For example, on a base plan of Rs 149, which would be valid for 28 days, a user would get 0.3 GB 4G-LTE data along with unlimited voice calls. However, on depletion of the quota, a user would have to buy a top-up plan. This is considering that Jio has not announced any pay-as-you-go plan for data, if a user ends up consuming the quota before the validity ends. Compared with this, Airtel offers 0.5 GB 4G data with a 28-day validity for Rs 148 in the Delhi circle, and Vodafone India offers 0.5 GB at Rs 147 with a 28-day validity. However, Reliance Jio’s plans also include unlimited local and national voice calling, which the company said would remain free even beyond the introductory offer period.

In costlier plans, the companies offering 4G offer similar amount of mobile internet compared to Jio. For example, Airtel, Vodafone and Jio offer 10 GB of 4G-LTE data for a sum of Rs 999, with a 28 day validity.

“From a spend pattern point of view, there is not going to be a significant change. ARPU for top three incumbents today is between Rs 180-196. So what is happening is Jio is aiming for people to move towards a more data-led consumption than voice-led consumption, but from a expenditure perspective, it’s not that Jio would reduce the overall ARPU. Even from a market perspective, Jio’s not going to get any lesser than the others,” Romal Shetty of KPMG said.

With Jio’s plans, however, a subscriber has additional benefits such as unlimited night-time data, 100 SMS per day, different amounts of data on its public Wi-Fi hotspots, etc. According to Jio, another ace up its sleeve is the “free voice calls”. While the company claims that the calls would remain free even beyond the introductory offer, analysts and industry experts share a different opinion. “There’s no such thing as a free lunch. What is being done is that in an all-data network, they’re not offering separate tariffs for data and voice, but only for data. It is really not free, but if you use a certain amount of your data for making a voice call, you’re paying something, and in that sense you are paying a certain price,” Rajan Mathews, director general of Cellular Operators Association of India, said.

However, contrary to popular beliefs, Jio says that despite it being an LTE network throughout, there would be no depletion of data when its consumer makes a voice call, and even when a consumer depletes the entire data in the quota, he or she would be able to make voice calls.

“My view is that voice is not free. If both of us are on Jio network, and I make a VoLTE call, it takes place through data, and doesn’t go through a voice channel. Hence there is consumption of data happening. When you buy a Rs 149 pack, in which you get 300 MB, there is depletion of data happening on a call. Further, the person receiving the call will also incur data charges,” Shetty said, adding that it is important for Jio to try and market disruptive offerings in order to grab market share, in an already competitive scenario.

Under such circumstances, the question that arises is how would the incumbent operators respond. Mathews said that the incumbents, knowing the usage pattern of their consumers, will target the segments accordingly. He added that the existing operators are likely to have plans targeting specific usage — voice, data, or both — by consumers.

In a note, Crisil Research said: “Making them (voice calls) free and pricing data well below existing tariffs will force incumbents to recalibrate their tariffs lower. We foresee operators gradually moving towards simpler all-you-can-eat plans wherein subscribers would be offered unlimited voice and fixed data access for a lumpsum amount, rather than the forest of foggy options available today. Tariffs will tumble, and we project average data realisations halving to ~Rs 0.10 per MB by 2017-18 compared with ~Rs 0.20 per MB currently.”

Shetty said that the way Jio has structured the tariff plan is structured, it wants a consumer to do a minimum spend. “So a consumer would end up paying at least the same amount of money whether he uses the data or not. Also, subscribers may decide to use voice on one network and data on Jio, because the per MB tariff of data has come down,” he added. He expects other operators to ready more bundled offers. “Or else they could come out with matching tariff plans, because they don’t want to lose subscribers. It is a customer acquisition strategy after all,” Shetty said.

Mathews also believes that while the “free” propositions made by Jio could attract consumers, it is unlikely to cause an immediate churn by the way of consumers leaving existing networks. “What will happen is consumers will maximise the use of ‘free’, something that we’ve already seen. But we don’t see consumers switching as of now. They’ve seen what the tariffs are, but they will wait to see what the competitors would do. We will see the incumbent operators in the next several days, position themselves against what RIL offers,” Mathews said.

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