With the entry of Reliance Jio, the war in the telecom industry has not only intensified but it has raised the possibility of ‘survival of the cheapest’.
The scenario in the telecom arena is rapidly changing every day, much to the delight of mobile users. Adding to the mix are the various state governments also offering lucrative offers such as free WiFi, free data to the young ‘voters’ in poll bound states.
On September 5, 2016, the Reliance Jio Welcome Offer was launched, offering free SIMs, unlimited data, and free voice calls forever. On December 1, the Jio Happy New Year offer was announced, which was to kick in from January 1, 2017, giving users 1GB data per day for free, as the company moved gradually towards paid plans. The paid plans begin from April 1 this year.
All this time, the other operators like Bharti Airtel, Idea Cellular, Vodafone, Docomo, etc have had to deal with Jio’s impact on their market value, market share, as well as a massive loss of revenue which is reflected in Airtel’s and Idea’s third quarter results declared this year. Experts in telecom industry have opined that Jio competitors will faced hard times in the future as lowering their tariffs to match Jio’s could mean a drop of 40-50 per cent of their revenue from their upper-end customers.
Before the dust storm could settle, Jio announced the Jio Prime membership on February 21, 2017, under which users can get 1GB data per day for Rs 303 per month. Jio Prime is available to users until March 31, 2017 and involves paying a one-time yearly fee of Rs 99 for the whole year ie the membership will be valid until March 31, 2018 and will ensure that for Rs 303 per month you get 28GB data per day with a plan validity of 28 days.
This is taking the battle exactly where it would hurt the incumbents the most. Jio Prime is creating a circle of premium users and offering data at rates much better than other incumbents. Of course, after Jio Prime announcement, Airtel came up with Rs 349 per month for 28 GB plan, Vodafone with Rs 346 per month for 28 GB plan, while Idea came up with Rs 348 per month for 14 GB plan.
What the customers must note here is that all these plans are segmented offers, which means, these are being offered to a select group of users only. Whether you are eligible for these plans or not, you will need to find out from your respective operator. Moreover, the offer is only for those who have 4G devices, and is only available in select circles. This may be why the incumbents are reaching out to select customers individually via SMSs rather than using any other means of mass communication.
There is more in the fine print (see chart 1 which is as per the recent offers in the telecom market): Jio has a Fair Usage Policy (FUP) of 1GB per day, upon exhaustion of which, the data speeds will drop to 128kbps. In case of Airtel, users will get 0.5 GB to spend during day time and the rest at night (3 am to 5 am). With Vodafone, you get 1GB per day while Idea users get 0.5GB per day. Vodafone also specifies that its Rs 346 plan is a limited offer and the first payment needs to be made before March 15, 2017.
But one thing to keep in mind for these premium customers is this: once past the FUP limit, the incumbents are charging Rs 4 per MB of data on a pro-rata basis, which comes to a whopping Rs 4,000 per GB, which is 400 times what Jio is charging. Therefore, exceeding the stated FUP limits is likely to result in an exponential rise in the bill amount.
In this industry, nearly 30 per cent of incumbent’s user base contributes to 70 per cent of its revenue. For the incumbent, this is their premium customer base, which has an above-average ARPU (Average Revenue Per User) of higher than Rs 300 per month. The incumbents might be doing well to selectively reach out to this premium base in order to keep them within their fold, but one thing is for sure: the real winner here is the customer, for whom, data charges have fallen nearly 60-80 per cent across tariff plans in just over one year.
During the launch of Jio Prime offer, the chairman of Reliance, Mukesh Ambani said, “As a token of its gratitude, the existing 100 million plus Jio subscribers can avail of the special ‘Jio Prime Membership’ programme which comes with several special benefits. First, Jio Prime Members will be able to enjoy the unlimited benefits of the existing Jio Happy New Offer for another full year or till March 31, 2018 for a nominal, one-time enrolment fee of just Rs 99 and a rock-bottom introductory price of only Rs 303 per month or effectively at just Rs 10 per day.”
Meanwhile, Airtel has introduced two new plans linked to data consumption in prepaid segment. “For the very heavy data users, the new 349 recharge now offers 1 GB of 4G data per day for 28 days along with free local and STD voice calls free to any network per month. This 1GB data will be available as 500MB on day time and 500MB on night hours. For the smaller data users, the 147 recharge offers free local and STD airtel to airtel calls and 2 GB data for 28 days. In the postpaid category, the 549 plan offers 6 GB data with unlimited local and STD calls and free incoming on roaming,” an official company source from Airtel told Herald.
Both Vodafone and Idea Cellular refrained from giving any official comments on this issue.
