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Analysts take on the new Reliance Jiophone 2021 offer

Analysts expect the launch of the ‘New Jiophone 2021 offer’ to accelerate subscriber addition for Mukesh Ambani’s telecom venture, but weaken the prospects of a tariff hike in the near term.

Reliance Jio Infocomm Ltd.’s new Jiophone offer provides for a device, free calling, and 2GB of data per month, according to a company statement. For new users, the one-year offer will cost Rs 1,499, and for two years it will cost Rs 1,999.

Existing users can avail one-year offer for Rs 749 (no device), it said. The offer is available from March 1 across Reliance Retail and Reliance Jio retailers.

In the new offer, JioPhone tariffs are slashed by 11-25%. Reliance Jio’s yearly plan of Rs 749 implies a 23% tariff cut compared to its cheapest 28-day plan priced at Rs 75 (Rs 975 a year) as per the old offer.

JM Financial
The launch aims at retaining the existing 100 million Jiophone subscribers.

The plan will help improve subscriber addition momentum by incentivising the industry’s 300 million feature phone users to upgrade to Jiophone 4G.

Successful traction in the new Jiophone offer and the impending smartphone launch will enable Reliance Jio to increase subscriber addition.

Reliance Jio would be more amenable to tariff hikes once its subscriber addition picks up. The tariff hike looks likely by the end of 2021-22.

New Jiophone plans could pose a significant risk of accelerated subscriber loss for Vodafone Idea given its network being relatively weak compared to other telecom operators.

Bharti Airtel also faces the risk of losing some of its 2G subscribers, but the risk might be limited as it’s fast expanding its coverage.

Goldman Sachs
An upfront commitment of one-two years may not seem appealing to most subscribers as most consumers, especially in the feature phone segment, typically recharge for a one-three-month period.

The new plan will lead to higher subscriber additions for Reliance Jio in the near term. However, the acceleration in subscriber momentum will be purely a function of improvement in the availability of devices, and not the newly launched annual JioPhone plans.

Expects a tariff hike in the near term. Smartphones and JioPhones as two mutually exclusive segments for Reliance Jio, and tariffs in one segment can be altered without a change in subscriber momentum in the other segment.

Limited impact on Bharti Airtel as the company may offset any negative impact from JioPhone through market share win from Vodafone Idea.

The offer may be attractive for feature phone users looking to change devices.

The move is likely aimed at increasing market share in this feature phone segment and boosting Reliance Jio’s moderating subscriber additions.

Reliance Jio’s primary focus is still on gaining subscribers, which dampens expectations of tariff hikes.

In case of a sharp underperformance (as seen over the past six months), Reliance Jio will likely resort to tariff tweaks.

Reliance Jio’s aggression in these offerings are due to significant moderation in subscriber additions in the last few months, inability to make any major headway in the post-paid market, delay in launching low-cost 5G smartphone, and fear of losing current JioPhone users whose three-year security deposit payback scheme is coming to an end.

The plans can lead to an acceleration in subscriber additions in the near term.

The new plans focus on the bottom-of-the-pyramid strata subscribers. Reliance Jio might be reluctant to tweak the tariff for mass subscribers as such a move will impact its profitability.

The move comes as a caution to potential investors of Vodafone Idea that subscriber losses might not end in the near term and tariff hike hopes are also unlikely to get fulfilled anytime soon.

Dolat Capital
The offer will help Reliance Jio to retain its own existing 100 million JioPhone users as they have started coming out of the handset lock-in period.

Don’t foresee this offer to create a significant dent in the 2G consumers of Bharti Airtel or Vodafone Idea.

The ability of low-income strata of the target segment to shell out Rs 1,999 and lack of handset choice could act as a barrier.

The competitive intensity remains high which could be negative for the expectations of the tariff increase. Bloomberg

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