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There will be little disruption from Jio’s new postpaid plans on Airtel, say analysts

Reliance Jio‘s (RJio) newly launched postpaid family plans on March 14 will have no disruption in the sector and would not impact Bharti Airtel’s (Airtel) existing plans also, said analysts tracking the sector on Thursday.

“We believe there will be little disruption from the new plans, which appear to be designed to avoid price competitive behaviour in the industry,” said analysts at HSBC Global Research.

RJio, on Tuesday, launched new postpaid family plans starting ₹399 (plus ₹99 for each add-on connection), with the aim of increasing its proportion of high-value postpaid subscribers.

And, though there will be no tariff war between the telcos, RJio’s announcement may hamper Airtel’s target of reaching ARPU of ₹300 at the earliest.

“Yes, it would make that goal harder to achieve,” Mahesh Uppal, Director at ComFirst (India) told businessline. On tariff war, he said, “I think the circumstances are quite different now. Jio then was a new entrant. It was using ultra-low prices to acquire a significant market share. Now, it wants to keep pressure on the incumbents by not letting them lower their costs and improve their margins.”

Uppal said that there will be a minimal impact of RJio’s plans on postpaid customers since the average customer is budget conscious and arguably, wary of surprises that postpaid bills can bring.

According to sector experts, India has more than 90 per cent of pre-paid customers and it will take time to get more individuals on postpaid plans.

As per CLSA, although RJio’s new entry family postpaid plan will renew expectations of subscriber gains, postpaid plans are not as price sensitive, and RJio’s ₹996 offer is comparable to Airtel and Vodafone Idea (VIL) offers at ₹999.

Besides, RJio’s individual postpaid tariff hike of 50 per cent will make the entry plan comparable to VIL and cut Airtel’s tariff premium from 100 per cent to 33 per cent, it said.

“The current move by RJio shows its focus on both converting existing prepaid into postpaid users and to drive market share gains in this segment. The new entry-level family plan of Jio Plus is cheaper but not necessarily disruptive, in our view. We believe this move would lower the barrier for users to move to postpaid as the total monthly outgo compared to a regular family plan will come down (although with lesser benefits),” said Morgan Stanley in a report.

As per Kotak Institutional Equities, RJio has so far been unable to replicate its prepaid success in the postpaid, as postpaid subscribers are typically less price sensitive, incumbents match the offer on porting requests, and users do not have the flexibility to choose the telco in the case of a corporate postpaid connection.

“However, we believe RJio is likely to have a better shot at attracting postpaid subscribers this time, especially from VIL ( 5G rollout is unlikely in the medium term). We expect peers to respond to RJio’s new offerings by lowering the add-on connection fee and/or introducing lower data allowance family packs at lower price points to retain their postpaid base, which could be 1-3 per cent average revenue per use (ARPU)-dilutive,” it said. The Hindu BusinessLine

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