Reliance Industries goes slow with JioFiber, after big-bang Jio launch

Slow and steady wins the race isn’t the mantra anyone will associate with Reliance Jio Infocomm Ltd. In less than three years of the launch of its mobile broadband services, it has become the clear market leader. The company first enticed customers by offering its services free and, even when it started charging them, tariffs were way below competition.

In comparison, the company’s plans for its fixed broadband services, under the JioFiber tag, are far more restrained. To start with, in its annual general meeting on Monday, parent company Reliance Industries Ltd (RIL) scaled down its target of reaching 50 million homes with its broadband services to 20 million.

Of course, the new target is nothing to sneer at. The entire fixed line broadband market in the country right now is at a little more than 18 million. Among private sector operators, the largest is Bharti Airtel Ltd, which has a subscriber base of about 2.3 million.

Even so, Jio’s decision to lower its target reflects the underlying challenges, such as last-mile connectivity and affordability. Interestingly, the company has decided on a minimum tariff of ₹700 for its 100GB plan, which isn’t vastly lower than competitors. “With most peers, offering 100GB plans and pricing starting from ₹600 and ARPU for most at ₹400-800, the plans do not appear as disruptive as in mobile,” analysts at Jefferies India Pvt. Ltd said in a note to clients. ARPU stands for average revenue per user.

The limited scope of the market and challenges with last-mile connectivity seem to have led to the decision. Taking broadband services to residences involve multiple approvals from authorities, such as municipal corporations and housing societies, which aren’t very easy to come by. Note that Jio’s broadband trial runs, which effectively amount to free services over the past many months, have resulted in a customer base of only 0.5 million.

Some analysts are hopeful that JioFiber may be better placed than competitors because of its bundled offerings, and its partnership with cable operators.

Last year, RIL bought stakes in DEN Networks Ltd, and Hathway Cable and Datacom Ltd, providing access to 27,000 local cable operators. At the time of acquisition, both had access to 24 million cable and 1.2 million broadband subscribers.

According to Rajiv Sharma, co-head (research) at SBICAP Securities Ltd, there are an estimated 20-25 million affluent homes in India. Add to this the infrastructure back-up of RIL, and market access from DEN and Hathway, Sharma expects RIL to add 3-4 million subscribers per year, achieving the target in five years.

In other words, the progress is expected to be slow and steady. This may have been fine, except that the pace at which capital expenditure has been incurred on the project was anything but slow. As such, the payback time for Jio’s massive expenditure continues to get drawn out.