While November 8, 2016 will go down as a historic date for India’s economy, September 5, 2016 would merit a similar status for the country’s telecom world. That’s the day Reliance Jio rolled out to the public and disturbed the order of the telecom industry forever.
One of the staggering changes to have occurred since Q3 2016 is that data prices have dropped massively across carriers. At present, the average cost of 1 GB data is $1.9 (Rs. 122.5) declining 48 percent in just a year, according to the Mary Meeker Internet Trends Report 2017. And unsurprisingly, Jio data is priced way lower than the average — at $0.17 (Rs. 11) per GB.
The price wars had begun even before Jio happened. In the first half of 2016, Bharti Airtel, Vodafone and Idea, the incumbents, started to slash data prices in anticipation of Jio which was advertising itself as the cheapest 4G network in the country.
Data costs fell 10 percent in a single quarter (Q2 2016) from $3.50 (Rs. 225) to $3.15 (Rs. 203) for 1 GB. After Jio launched with a totally free six-monthly offer, Airtel, Vodafone and Idea began to lose data subscribers. And they were compelled to slash data prices further over the next two quarters, thereby reducing the average cost of 1 GB data to under $2.
Consequently, monthly data consumption skyrocketed. Indians now consume more than 1.2 billion GB of data every month. That is a nearly 10 times increase from June 2016 when less than 200 million GB of data was being consumed monthly.
While critics believed that Jio would not be able to turn free hoarders into paid subscribers post Q1 2017, it turns out that 72 million customers out of their 108 million sign-ups are now paying for Jio data. Hence, there are slim chances of average data prices going up, and the troika of Airtel, Vodafone and Idea might have more losses to contain with.
Not only mobile data, Jio has disrupted the broadband industry too with its low-price offerings. Before Jio launched, India had 192 million broadband users. In just two quarters (Q4 2016 and Q1 2017) the broadband user base has grown to 277 million, with Jio securing the highest share (39 percent) with 108 million subscribers.
That essentially means, it has not only grown the market but also squeezed out share from its peers. Bharti Airtel comes a distant second with 49 million broadband subscribers, while Vodafone and Idea (which have now merged) have 38 and 25 million customers respectively.
While consumers have embraced Jio’s freebies, the telecom industry has been worst hit in years. The annual revenue of telecom firms declined for the first time since 2008-09 to Rs 1.88 trillion in 2016-17 (from Rs 1.93 trillion the previous year), and is likely to decline further to Rs 1.84 trillion in 2017-18, brokerage firm CLSA stated in an April report.
Another research by CRISIL estimates that telecom ARPUs will hit a five-year low of Rs 150 and revenues of incumbents will fall by 10 percent year-on-year. Not only data, their voice revenues are declining too as customers shift to Jio which has made voice calls free for its Prime subscribers until March 2018.
The Jio effect is still playing out in Indian telecom. We surely haven’t seen the end of it. As a recent brokerage report says: “Jio is perhaps trying to force an extreme endgame where it emerges as a super-dominant player. Generating returns seems to be an after-thought at this point.”