Reliance Jio’s big plan to capture over 50% of India’s mobile market in 3-4 years

jioReliance Jio Infocomm aims to capture half of India’s revenue market share and aims for 50% EBITDA margins, underpinned by increased data consumption and service quality the company expects will draw high-paying consumers to the carrier owned by the country’s richest man.
In a presentation to analysts, Jio said data will be at the vanguard of its planned market-share expansion. The company did not specify the time-frame for reaching its financial targets, but people familiar with the matter said these were expected to be met in 2020-21.
In the December quarter, Bharti Airtel had a market share of 33.1%, Vodafone India owned 23.5%, and Idea Cellular had 18.7%. They were followed by Tata Teleservices Ltd (TTSL), Aircel and Reliance Communications with 6.2%, 5.5% and 4%, respectively, according to brokerage HSBC. Similarly, Bharti Airtel had an ebidta margin of 36.7% and Idea Cellular 25% in the December quarter. In the six months to September, Vodafone India’s ebidta margin was 29.6%. Vodafone India and Idea are in talks for a possible merger.
Deutsche Bank Equity Research Asia, which attended the first analyst meeting held by Jio, said the company expects India’s mobile market will expand by 50% over five years to $45 billion (Rs 3 lakh crore) versus $29 billion (Rs 1.94 lakh crore) currently. Industry revenue growth is likely to drive government revenue by 50%, Jio said in its presentation.
To be sure, some analysts considered Jio’s targets aggressive. Bank of America Merrill Lynch said both targets appear “very ambitious,” adding: “We note that not many telcos in the world are consistently able to increase average revenue per user (ARPU), a key thing which we think Jio is banking on to help it generate strong revenue/ebitda.”
Deutsche Bank-Equity Research-Asia said: “Contrary to investor expectations, Jio believes the Indian telecom market is likely to grow by 50% over five years driven by ARPU growth. Jio expects data yields to stabilise at around Rs50/GB. The yield under their current plans is around Rs 30/GB, which they expect would rise over time.”
Jio’s financial projections are premised on explosive growth in data. It said the overall industry revenue in India will touch Rs 3 lakh crore in the next three-four years.
About Rs 1 lakh crore in voice revenue will shift to data, pushing the latter’s growth to Rs 1.3 lakh crore in the same period.
Bank of America Merrill Lynch expects Jio to aggressively target enterprise customers. “Over a longer term, we got a sense that Jio is keen on raising consumer yields/ARPUs. We consider it beneficial for incumbents and the industry,” said its report.
Leading global consultants have forecast demand for data at 500-600 crore GB per month. At a yield of Rs 50 per GB, it translates to Rs 3-3.6 lakh crore per year, which is equivalent to 1.35-1.6% of projected GDP, but still lesser than 2.5% in developed economies, said the Jio presentation.
The carrier estimates that there are around 263 million (exact figure), smartphone users, with an effective ARPU of Rs 329 and 496) (exact, figure) million feature phone users with an effective ARPU of Rs 172.
Deutsche Bank Equity research Asia report states that Jio expects unique subscribers at around 800 million in the medium term and believes around 400 million users can afford to pay about Rs 500 on digital services, which is much higher than the ARPU of Rs 179 in 2009.
Jio’s assertion comes a few days after the Telcom Commission, the country’s apex policy maker for the industry, pulled up the regulator for allowing the company to continue promotional offers, costing the government Rs 685 crore.
With seven customers joining every second since September 5, Jio disrupted the industry with its ‘Welcome’ and ‘Happy New Year’ offers that provided subscribers free voice and data services along with access to the company’s digital content ecosystem. Following the inevitable price war, Bharti Airtel’s profit fell 55%, Vodafone India’s on-year service revenue fell 1.9%, while Idea posted its first ever loss since listing in 2007 in the December quarter.
Jio also said the Indian data market expanded six times with the introduction of Jio in less than six months, from 20 crore GB a month to 100 crore GB. Jio, according to Bank of America Merrill Lynch, sees itself as a primary SIM operator. “On a dual SIM phone, when a consumer decides to use Jio SIM for data, then it is by default the SIM where more ARPU will be spent,” the brokerage said.
Jio’s VoLTE traffic of 200 crore minutes a day is equal to Vodafone’s circuit switch voice or traditional voice service, the telco said. It added that the bulk of network is already built, supporting more than 60% of 2020-21 data demand. The telco currently caters to 85% of mobile data traffic in India. The firm said it has filed 53 patents till date.
The 4G entrant has also informed analysts that for incumbents, refarming 3G spectrum to use for 4G is very costly and challenging.
Bank of America Merrill Lynch said the pressure on incumbents’ ARPU will continue since companies such as Bharti Airtel will try to match Jio’s offers. This week, Sunil Mittal-owned Bharti Airtel scrapped roaming charges for outgoing and incoming calls and SMSes and data usage within India.
Filed in: News

Related Posts

Bookmark and Promote!

© 2017 ItVoice | Online IT Magazine India. All rights reserved.
Powered by IT Voice