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Reliance Jio can acquire 80 million 4G users in 2 years: CLSA

Reliance-Jio-Infocomm
Reliance Jio Infocomm is slated to acquire 80 million 4G customers in the next two years, with more than half expected to switch over from India’s top three carriers, Bharti Airtel, Vodafone India and Idea Cellular, brokerage CLSA said Tuesday.
The anticipated 4G boom will lead to a trebling of data revenue to Rs 80,300 crore (about $12 billion) over the next two years, with Airtel, Vodafone and Idea commercially launching the faster wireless internet service and newcomer Reliance Jio likely to follow suit by March, the brokerage said. However, data realizations may fall as competition picks up, it said.
New entrants typically gain a 2 to 5% market share within eight quarters of entering a market with six to seven operators, CLSA said, citing its analysis of 17 service launches across eight Indian circles over the past 13 years.
Jio will do even better by “gaining a higher 7% market share by March 2018,” assuming a March 2016 launch, which translates into 80 million subscribers and a 16% market share in data subscribers, CLSA said.
Analysts at CLSA believe a majority of Jio’s subscriber additions in the first flush will happen in urban areas. “We expect over 55% of its subscribers to come from Bharti Airtel (15 million), Idea Cellular (10 million) and Vodafone India (20 million),” the brokerage said in a note to clients, a copy of which was reviewed by ET.
Since data-heavy markets are expected to be the early adopters of 4G, analysts at CLSA expect Jio to target them first after it commercially starts services, but cautioned that “disruption in these regions would be tough due to the higher share of postpaid subscribers.”
Increased competition after Jio’s 4G commercial launch will also impact realizations as existing operators would launch “promotional pricing plans” to hold on to subscribers and attract new ones.
Last month, Mukesh Ambani-owned Jio launched its much-awaited 4G service for group employees, setting the stage for a fierce battle with incumbents, which have kicked off their respective 4G services. Bharti Airtel, Vodafone and Idea are expected to ring-fence their businesses and invest heavily in 4G as they reinforce services in anticipation of an expected tariff battle and moves toward consolidation in the coming months.
“Incumbents are rolling out networks at an aggressive pace to gain first-mover advantage, given the delay in Jio’s commercial launch, which is widely expected around 2QCY16,” said CLSA.
The brokerage expects increased competition to trigger a higher 20% annual decline in data realizations across companies since pricing plans are typically focused on increasing data usage. A silver lining, however, is a potential spurt in data ARPU (average revenue per user), a key performance metric, owing to higher data usage and traffic levels, it said.
CLSA expects operators with a weaker data spectrum footprint to cut voice realizations in a desperate bid to arrest subscriber churn, which could trigger a 5% decline in voice revenue per minute (RPM) in FY17-18 for the top carriers. “This has already started with Vodafone offering 20-40% discounts to Bharti Airtel (rates) in Delhi and Mumbai,” CLSA said in its note.
The analysts expect the current 4G handset population of 20 million to jump to 180 million by March 2018, driven largely by the replacement of existing smartphones. They said 4G adoption will largely hinge on a “superior experience” that will be determined by spectrum coverage and network capacity.

Reliance Jio Infocomm is slated to acquire 80 million 4G customers in the next two years, with more than half expected to switch over from India’s top three carriers, Bharti Airtel, Vodafone India and Idea Cellular, brokerage CLSA said Tuesday.
The anticipated 4G boom will lead to a trebling of data revenue to Rs 80,300 crore (about $12 billion) over the next two years, with Airtel, Vodafone and Idea commercially launching the faster wireless internet service and newcomer Reliance Jio likely to follow suit by March, the brokerage said. However, data realizations may fall as competition picks up, it said.
New entrants typically gain a 2 to 5% market share within eight quarters of entering a market with six to seven operators, CLSA said, citing its analysis of 17 service launches across eight Indian circles over the past 13 years.
Jio will do even better by “gaining a higher 7% market share by March 2018,” assuming a March 2016 launch, which translates into 80 million subscribers and a 16% market share in data subscribers, CLSA said.
Analysts at CLSA believe a majority of Jio’s subscriber additions in the first flush will happen in urban areas. “We expect over 55% of its subscribers to come from Bharti Airtel (15 million), Idea Cellular (10 million) and Vodafone India (20 million),” the brokerage said in a note to clients, a copy of which was reviewed by ET.
Since data-heavy markets are expected to be the early adopters of 4G, analysts at CLSA expect Jio to target them first after it commercially starts services, but cautioned that “disruption in these regions would be tough due to the higher share of postpaid subscribers.”
Increased competition after Jio’s 4G commercial launch will also impact realizations as existing operators would launch “promotional pricing plans” to hold on to subscribers and attract new ones.
Last month, Mukesh Ambani-owned Jio launched its much-awaited 4G service for group employees, setting the stage for a fierce battle with incumbents, which have kicked off their respective 4G services. Bharti Airtel, Vodafone and Idea are expected to ring-fence their businesses and invest heavily in 4G as they reinforce services in anticipation of an expected tariff battle and moves toward consolidation in the coming months.
“Incumbents are rolling out networks at an aggressive pace to gain first-mover advantage, given the delay in Jio’s commercial launch, which is widely expected around 2QCY16,” said CLSA.
The brokerage expects increased competition to trigger a higher 20% annual decline in data realizations across companies since pricing plans are typically focused on increasing data usage. A silver lining, however, is a potential spurt in data ARPU (average revenue per user), a key performance metric, owing to higher data usage and traffic levels, it said.
CLSA expects operators with a weaker data spectrum footprint to cut voice realizations in a desperate bid to arrest subscriber churn, which could trigger a 5% decline in voice revenue per minute (RPM) in FY17-18 for the top carriers. “This has already started with Vodafone offering 20-40% discounts to Bharti Airtel (rates) in Delhi and Mumbai,” CLSA said in its note.
The analysts expect the current 4G handset population of 20 million to jump to 180 million by March 2018, driven largely by the replacement of existing smartphones. They said 4G adoption will largely hinge on a “superior experience” that will be determined by spectrum coverage and network capacity.

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