Reliance Jio free offer impact on rivals likely by Q3: analysts
Indian telecom companies added more subscribers in September than their six-month average despite the launch of Reliance Jio Infocomm Ltd, which was expected to make major inroads into their market shares. Bharti Airtel pulled in the most subscribers.
Reliance Industries Ltd had last week said it would infuse as much as Rs1 trillion in its telecom arm, which had a total of 16 million subscribers at the end of September.
Morgan Stanley analysts said Reliance Jio’s expenditure on capital and spectrum is justified, considering it drives four times the data on Bharti Airtel’s network and as much as 12 times on Idea Cellular Ltd’s network in terms of MBs (megabytes). The analysts said in a note that even as the recent spectrum auction had boosted spectrum health of the industry, it would result in a more intense competition in the data market without promising revenues. Therefore, the unpleasant effect of Reliance Jio’s freebies will be accelerated by the expenditure incurred in the just concluded auctions, they said. The analysts said incumbents may witness impact of Jio in the third quarter.
The Telecom Regulatory Authority of India has issued an order asking Reliance Jio to discontinue its free offer period after 31 December and extend free trial only to users enrolling before 3 December.
“The news is not materially positive for incumbents...since Jio can potentially offer new promotions to customers who sign up after 3 December as well,” Goldman Sachs said in a report on 21 October. “Further, we believe the order does not prohibit Jio from extending free voice/data beyond 31 Dec for existing customers.”
Bharti Airtel and Reliance Jio did not respond to emails.