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Reliance Jio’s price hike is a step back, but in the right direction

The marginal price hike in tariff may hurt user perception, but it is actually good for all the telecom operators.

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Reliance Jio has disrupted the Indian telecom space – first with low data tariff, and now with the introduction of the smart feature phone, JioPhone. Three months ago, the company introduced the Rs 309 plan with a validity of 84 days and data benefits of 84GB (1GB per day). Jio recently revised its tariff plans and users will now have to pay around 15 percent or more for the same plan benefits. The new plan is priced at Rs 459, and offers 84GB data (1GB per day) and a validity of 84 days.

Users also have the Rs 399 plan to opt for, but it comes with reduced benefits – validity of 70 days, with 70GB data (1GB per day). With the cut throat competition, incumbent operators were forced to reduce their tariffs and match with Jio’s offerings. But we all know; these kinds of sops cannot continue forever. The first sign came right after Jio ended the freebies and introduced the subscription mode. Now, the company hiking its tariff may seem like a step back, but it is a move in the right direction. Confused? Let me explain. ALSO READ: Reliance Jio throttles FUP speeds and they are a joke

One step at a time

As a new kid on the block, Jio had to offer freebies to attract users. These freebies came in the form of free SIM cards, unlimited local and national voice calls, and unlimited high-speed internet. The move helped Jio to garner record subscriber base in just under 180 days after launching its services. The company then introduced Prime membership for Rs 99, and Rs 309 subscription pack with “three months complimentary access” offer. In essence, customers got three months of unlimited usage (1GB data per day) for just Rs 408.

It was the perfect strategy to test customer sentiment, to gauge if they are willing to pay for services. And sure enough, Jio saw a record number of subscribers migrating from free to paid model. And that brings us to the present day. Even with the hike in tariff with reduced benefits, customers today get a lot more than they used to get before. ALSO READ: Reliance Jio reveals new tariff plans for prepaid and postpaid users: Here’s everything you need to know

A year ago, 1GB data plan (per month) used to cost Rs 250, but today, a plan costing anywhere between Rs 330 to Rs 400 gives you 1GB high-speed 3G/4G data per day. Yes, it did put pressure on incumbent operators, but it is the end users that are reaping the rewards. ALSO READ: Beyond Reliance Jio, incumbent telcos need to create solutions for India’s data problem

Time to think revenues

BGR India spoke to Mahesh Uppal, who is a consultant for telecommunication regulations. We asked him about his views on Jio hiking the tariff, to which he said, “The companies cannot splurge indefinitely. The priority now is to maximize revenue from data capacity sold and to do so without appearing to be raising prices.” ALSO READ: Micromax Bharat 1 vs Reliance JioPhone vs Airtel Karbonn A40 Indian: Price, specifications and tariff compared

Well, point is fair enough. The splurge has to stop at some point or the other, and the earlier it happens, better it is for the company. According to Tarun Pathak, Research Analyst at Counterpoint Research, “Reliance Jio has disrupted the market and existing telecom operators have been facing the heat since then. But at the same time, Jio has also got users acquainted to content services. Even customers in rural areas and small villages now consume content – be it watching videos on YouTube or watching Live TV on JioTV app”.

Even if the data tariffs and benefits keep varying, people have got used to content consumption, and they will need more data. There are two ways how telecom operators can cope with this demand, and also generate money. Firstly, they can introduce add-on booster packs for users who want to consume data beyond their daily / monthly allowance. Secondly, content tie-ups and partnerships with OTT players, such as Netflix, Hotstar and Eros Movies, to name a few, would serve as source of revenue for the operators. Bringing more content on the platform would also help to attract more customers. ALSO READ: Reliance JioPhone is on a quest to dominate the rural telecom market in India

It’s all about ARPUs now

According to COAI’s latest numbers, India has a total mobile subscriber base of 946.66 million as of September 2017. Bharti Airtel leads the peak position with a market share of 29.8 percent, with total subscriber base of 282.04 million. Vodafone takes the second spot with 207.44 million subscribers, whereas Idea Cellular has 190.15 million subscribers.

If we look at the ARPUs for the last quarter, Reliance Jio earned Rs 156, Airtel earned Rs 154 whereas Vodafone and Idea earned Rs 141 per customer. For those who are unaware of what ARPU is, it is the abbreviation for Average Revenue Per User. So, for instance, if a telecom operator has 10 subscribers, out of which 5 are paying Rs 100 per month (5×100 = Rs 500), and the remaining are paying Rs 500 a month (5×500 = Rs 2,500), the average revenue comes to Rs 300 (Rs 2,500 + Rs 500 / 10).

With the launch of JioPhone, Reliance Jio is targeting those users who want to continue using a feature phone, but looking for some smart extras too. Similarly, Airtel and Karbonn also partnered for an affordable entry-level smartphone, BSNL partnered Micromax for Bharat 1 4G phone, and today itself, Vodafone announced it will be launching Bharat 2 Ultra 4G smartphone in partnership with Micromax. If customers from these tie-ups and JioPhone are to be considered, it will not only help telecom operators gain more subscribers with a wider reach across India, but also help to boost their ARPUs further.

Speed throttling is bad, but…

Starting October 19, Jio revised its prepaid and postpaid plans that saw a hike of 15 percent in tariffs. But, along with that, Jio also cut down the FUP speed from 128Kbps to 64Kbps, which sure is a step back. The younger generation is used to the high-speed 3G and 4G connectivity, but those who have been using the internet since late 90s would know how painful dial-up internet with 64Kbps was. ALSO READ: Reliance JioPhone hands-on and first impressions: A ‘smart’ feature phone

Forget music and movie streaming, with the web pages getting heavy with multimedia content, opening a news site or even Gmail could be challenging with 64Kbps speed. On one hand, Jio has been talking about being the biggest broadband provider in India, and has also been topping in network speed in TRAI’s reports. And with that, throttling the speed further is not something one would expect. It is more like living a split-personality – high-speed internet in the first half, followed by snail-pace internet after data limit is hit, only to wait for 12AM when the speed is restored.

But then again, limiting users with the data that they consume opens up an opportunity for telecom operators to introduce top-up booster packs. Only heavy users are likely to opt for such packs, which in turn will help operators further boost their ARPUs as the average user spend increases. ALSO READ: Reliance JioPhone is on a quest to dominate the rural telecom market in India

One may debate that 512Kbps is the minimum broadband speed recommended by TRAI, but it is also important to note that it is for the wired line connections. Even 300MB data per day should be good enough to suffice needs such as checking emails, connecting with people on WhatsApp and other instant messaging clients. If you want to stream content, there are higher plans you can opt for.

  • Published Date: October 24, 2017 6:45 PM IST