JioPhone likely to expand Reliance Jio subscriber base by 100 million: Fitch
Mumbai: The cheap 4G feature phone offer from Reliance Jio Infocomm Ltd is “likely” to help the company add 100 million more subscribers and take its revenue market share to 10% by 2018 and help reverse the falling industry revenue trend, says a report.
“Reliance Jio’s plan to introduce a cheap 4G handset from September will accelerate Internet adoption and should help reverse the recent decline in telcos’ revenue,” Fitch said in a note on Monday. “The cheap handset would add 3-4% (or around $950 million) to annual industry revenue if adopted by at least 100 million subscribers, which appears likely,” the report said.
Reliance Industries Ltd chairman Mukesh Ambani had last weekend told shareholders that Reliance Jio would introduce the JioPhone at an “effective” price of Rs0 where the customers will have to pay a refundable deposit of Rs1,500 to get a feature phone with an 4G connection.
Fitch said JioPhone will attract first-time 4G users and help Reliance Jio gain revenue market share. Reliance Jio handset is likely to quickly replace 2G handsets in rural areas, where smartphones had previously been out of reach for many potential customers, it said, adding the country’s Internet adoption rate is among lowest in Asia-Pacific on high prices and a lack of fixed-broadband networks in rural areas.
The agency said the industry revenue declined 15.6% on a year-on-year basis to $6.1 billion for the March 2017 quarter and added that the monthly tariff of Rs153 is 50% above the current average revenue per rural user which should help industry revenue.
“Reliance Jio is likely to boost its revenue market share from 3-4% to over 10% in 2018. We expect most of this increase to come from new revenue generated by the expansion of the 4G market,” it said.
The monthly tariff will impact revenue market share of incumbents such as Bharti Airtel Ltd, but the older companies can also benefit through this as Reliance Jio’s moves can help raise data usage and average spending across the market.
Despite this move, the agency retained its negative outlook on the sector, which has been adversely impacted by the entry of Reliance Jio.
“Jio is likely to roll out other offers to increase its subscriber base over the next two years, and incumbents are likely to continue to respond with price cuts, discounts and promotions of their own,” the report said, adding that Reliance Jio’s revenue market share is lower on aggressive pricing.
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