Reliance Jio Infocomm’s commercial launch of 4G services could be further pushed to December, in which case the telecom arm of Reliance Industries may find it difficult to aggressively poach high-end consumers from incumbents Bharti Airtel, Vodafone and Idea Cellular unless it brings down prices, Bank of America-Merrill Lynch has said.
The US brokerage expects Jio to delay its 4G launch until “it is confident of creating a strong first impression, both in terms of network quality and customer experience in an already overcrowded market as it is likely to get only one chance to do so, especially when it is trying to poach high-end consumers”.
“In our recent meetings with industry participants, a consistent view coming out is (of) risks of Jio’s commercial launch being pushed to December 2016,” said BankAm-Merrill in a note to its clients. The delay, it said, would also make it difficult for Jio to gain traction, especially since top-end postpaid customers tend to be sticky and difficult to poach. “The 40 million-odd top-end consumers are high-end, single-SIM users, and in our view, they will not use dual SIM smartphones nor port out from incumbents.
Hence, it would be difficult for Reliance Jio to poach these consumers from incumbents,” said the brokerage. Brokerage IIFL Institutional Equities also expects Jio to go for a fullscale 4G launch only by December. It said that much hinges on the conclusion of the Reliance Communications-Sistema Shyam merger, which is awaiting clearances from courts and the department of telecommunication (DoT).
In January, Anil Ambani-led RCom and Jio had inked ambitious spectrum trading and sharing pacts, moves aimed at helping the combination leverage each other’s 850MHz airwaves for launching 4G across India.
RCom, in turn, is poised to take over Russian conglomerate Sistema’s Indian mobile telephony venture, Sistema Shyam Teleservices, which operates under MTS brand. “Jio is likely to be in a position to use RCom’s 850 MHz spectrum only towards December since the Anil Ambani-led carrier can do the spectrum sharing and trading deal with Jio only after obtaining alternate 850 MHz through a merger with Sistema Shyam” said IIFL Institutional Equities.
Brokerage BankAm-Merrill, however, said a potential commercial launch by December would enable Jio to launch 4G services “in 60-70% of the cities”, aided by a much improved and maturing handset ecosystem.
But continuing zero visibility on the timeline of Jio’s commercial launch, the brokerage said, would give the top three incumbents – Bharti Airtel, Vodafone India and Idea Cellular – “a 6-8 month window to fortify their respective 3G/4G networks, inch down data tariffs, and also be in a position to slightly tweak up voice tariffs”.
“Consequently, “high-end (data) consumers would unlikely move to Jio if they get good quality data networks from the incumbents,” said the US brokerage.
The entry of Mukesh Ambani-owned Jio, which was widely rumoured to launch commercial services next month, is slated to trigger a war for higher-paying data subscribers.
If Jio, on the contrary, goes for a phased commercial launch by June this year, analysts at BankAm-Merrill feel the company may have to grapple with the challenges of an “initial 850 MHz handset ecosystem disadvantage”. “Less than 15% of the 4G smartphones currently sold in India support both 850MHz and VoLTE, and an early launch will limit the mass-market appeal of Jio’s services,” the US brokerage said in the note.
According to BankAm-Merrill Lynch, a phased 4G launch by Jio would give Bharti Airtel, Vodafone and Idea more time to defend turf. “Since Airtel, Idea and Vodafone have already launched 4G services in select cities, they would be in a better position to respond as they would have more time to build networks and respond effectively to Jio’s challenge,” said the brokerage.
Market leader Bharti Airtel has rolled out 4G in 15 circles, Vodafone India in five and Idea, in 10 circles.