Reliance Jio seeing sharp decline in subscriber growth rate: analysts

Sale of Reliance Jio SIM cards have been hit by demonetisation, says Motilal Oswal report


The reasons for sharp decline in subscriber growth rate are back-end IT issues, poor customer services and weakness in distribution channels, say analysts
The reasons for sharp decline in subscriber growth rate are back-end IT issues, poor customer services and weakness in distribution channels, say analysts

New Delhi: Despite expanding distribution channels from just Reliance-owned retail stores to others, Reliance Jio Infocomm Ltd is struggling with slow subscriber growth and the subscriber run rate has fallen to less than 50% after the first 15 days of the launch. In fact, the company’s sale of SIM cards has been hit adversely after the government’s demonetisation move as there has been a 40-50% dip in the footfall in comparison to last month, Motilal Oswal noted in a 16 November report.

Considering the services of Reliance Jio have not been able to make a mark lately, analysts expect them to extend the welcome period offer to achieve the 100 million target. “RJio had targeted to reach 100m subscriber base by Dec-16. If RJio is unable to achieve this target, there is high probability of extension of the Welcome Offer beyond Dec-16. Channel partners see high risk of subscriber churn post the Welcome Offer, as most subscribers are using Jio as a second SIM to take advantage of free offerings,” analysts at Motilal Oswal said.

The reasons for this attrition in subscriber growth are back-end IT issues, poor customer services and weakness in distribution channels. “While the company is trying to make progress on these fronts, it gives incumbents a buffer of 12-18 months to further capitalize on their strengths,” the report said.

The consumers are witnessing a fall of about 70-80% in speeds over the last three months and the high usage during the free offer period has been worsening the case for Reliance Jio. Considering that Reliance Jio has been directed by the Telecom Regulatory Authority of India (Trai) to wind up the free offer period by 3 December 2016, the company is expected to introduce price plans to target the mass market of Rs200-300 APRU (average revenue per user) subscribers.

Reliance Jio launched its services commercially on 5 September and announced a free welcome offer with unlimited data and voice for subscribers till 31 December 2016, which now as per Trai guidelines has been limited to 90 days, till 3 December 2016.

The change in consumer pattern for data and voice shows that despite call drops and poor voice quality, the customers remained loyal to their service provider. However, for extensive data users, poor services trigger shift from one operator to another, indicating that expectations of data customers varies from voice customers, the report said.

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