Jio's postpaid plans timed well to leverage possible churn of VIL subscribers: Analysts

New Delhi: Reliance Jio‘s aggressive postpaid offensive with plans that pack-in extensive content portfolio is timed well, and could wrest away market share from Vodafone Idea, analysts said on Wednesday. Vodafone Idea has the “most to lose from a churn in this base”, while Bharti Airtel’s network coverage and digital engagement being stronger than Vodafone, makes its premium subscribers less vulnerable to the churn, JP Morgan said in its latest report.

After unleashing a price war in mobile tariffs and fibre-broadband services, billionaire Mukesh Ambani-led Reliance Jio on Tuesday unveiled postpaid plans, bundling up to 500 GB of data and subscription to Netflix, Amazon Prime and Disney + Hotstar.

The move assumes significance as it marks a major tariff offensive by Jio in the postpaid category, where typically Average Revenue Per User (ARPUs) tend to be almost three times higher than the prepaid segment.

“Given the implied cost (per GB) of data adjusted for OTT, bundling is now 50-33 per cent cheaper than Jio’s own prepaid plans in similar data limits, Jio’s target perhaps also is upgrading its own 280 million smartphone subscribers to postpaid and higher ARPU plans,” JP Morgan said.

This may nudge the overall market to higher ARPU and be a positive for the industry, it said.

Matching Jio’s OTT bundling can impact 1-6 per cent of fiscal 2021 earnings before interest tax depreciation and amortisation (EBITDA) for peers, it added.

“We expect Bharti and Vodafone Idea to match Jio’s OTT bundling to prevent churn of their postpaid subs (subscribers) rather than a headline price drop,” the note said.

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Jefferies, in its report, said Jio’s postpaid offerings are “well timed to take share from Voda-Idea”, but “unlikely to rock Bharti’s boat”.

“This is Jio’s second attempt at postpaid and is well timed to target potential churn among 23 million postpaid subscribers of Vodafone Idea,” Jefferies said, adding it sees limited risks to Bharti Airtel as it has managed the churn well.

In its view, Vodafone Idea’s postpaid subscribers are susceptible to churn “as its service quality gap widens and Jio’s refreshed postpaid offering is well timed to leverage this opportunity.”

With Bharti maintaining up to 25 per cent premium pricing in prepaid category, Jefferies believes lower postpaid pricing by Jio is unlikely to drive churn materially for the operator.

A report by Emkay observed that Jio, in the past, had tried to capture the postpaid market with aggressive pricing, but consumer stickiness and lack of content offerings prevented notable gains.

However, this time, extremely aggressive content offerings (Netflix, Amazon prime, Disney+Hotsar VIP) could be the key attraction for consumers.

“VIL’s weak financial position and a higher proportion of postpaid subscriber base make it more vulnerable to losses. We are hopeful Bharti will follow Jio on content offerings, which should limit subscriber losses and the impact on revenues,” it said.

BNP Paribas said Jio has announced “aggressive” new tariff plans for postpaid customers.

Jio’s new tariff plans will be offered at a higher starting price of Rs 399 per month (against the previous plan starting from Rs 199), but then the big difference is that the company is now bundling premium content “at a very affordable price”, it said.

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Competition may need to add Netflix to its offering, BNP Paribas said.

“…an attractive content bundling offer could make postpaid attractive for a larger consumer base and this could potentially expand the postpaid market size,” it said.



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