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Reliance Jio Infocomm Ltd, which is struggling to add wireless users, is betting on a new two-year all-in tariff plan to keep subscribers from deserting its network as an earlier three-year plan that helped the company vault to pole position in India nears expiry.

The latest tariff plan, which comes bundled with Jio’s new feature phone, offers users an annual recharge plan of 749 instead of 977 that a user would spend for a similar offering.

The new plan is seen as an attempt by the company to retain subscribers who are completing their three-year commitment to the network after they signed up for the plan in droves in 2018, helping Jio surpass Vodafone Idea Ltd and Bharti Airtel Ltd to become India’s largest telco by users.

“This (the new offer) should help arrest the churn and also target 300 million low Arpu (average revenue per user) feature phone users in rival networks," a telecom analyst said, requesting anonymity.

In the current fiscal, Jio’s net subscriber additions have slowed to 7 million a quarter, a 65% decline from the 20 million it added every quarter in the previous fiscal year.

Tariff plans that come bundled with Jio feature phones accounted for half of the additions.

“With new aggressive plans, Jio attempts to accelerate its subscriber addition by targeting feature phone users of incumbents," said a 1 March note by Axis Capital.

Though Bharti Airtel and Vodafone Idea have been converting 2G subscribers to 4G, about 265 million of their users still use phones primarily to make calls.

Jio’s attractive pricing is likely to accelerate the conversion rate to 4G networks.

“The offer could be targeted at retaining a meaningful proportion of the estimated 25 million initial JioPhone users who had entered into three-year contracts in the first half of 2018 and whose contracts could therefore be coming up for renewal," said Citi Research in a report on 28 February.

Analysts said they expect Bharti’s net additions to slow to 3-5 million per quarter this year from 14 million in the fourth quarter of 2020.

Both Bharti Airtel and Vodafone Idea have about 132 million non-data subscribers, including multi-SIM subscribers, with their usage limited only to incoming calls.

Since Jio is a 4G-only network, Vodafone Idea’s 2G subscribers cannot migrate to Jio unless they buy a new handset, whereas migration to Bharti requires no additional investment in a handset.

With its new JioPhone offers, the telco plans to capture market share by signing up low-end (2G/3G) customers on other networks.

Though Reliance Jio is currently India’s largest telco by market share, its net subscriber addition has been on a decline. It added only 478,917 users in December versus rival Bharti Airtel’s addition of 4.1 million.

Vodafone Idea has been losing millions of 2G customers a month. It lost 5.7 million subscribers in December alone, the highest since March.

With this, the telecom operator has lost 34.9 million customers during April-December.

Kotak Institutional Securities, in a report, said that the upfront payment (of 1,999) required to avail the bundled device plan could act as a deterrent for the customer segment being targeted by JioPhone offers, even as it provides attractive value for money in terms of unlimited voice and a reasonable amount of high-speed data, covering the basic requirements of a smart 4G device, for two years.

According to company data, Vodafone Idea had 269.8 million subscribers as of 31 December, down from 271.8 million in the previous quarter. It had 109.7 million 4G users in Q3 versus 106.1 million in the September quarter, indicating that it has lost 2G customers.

Reliance Jio and Google are designing an entry-level 4G or even 5G smartphone for a fraction of its current cost. The company plans to launch low-cost Android smartphones this year.

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