RJio to Come Under Pressure as India's Old Guard Fights Back

India's only pure-play 4G service provider, Reliance Jio Infocomm, has emerged as the fifth-largest telco in the country after acquiring 72 million paying customers since its launch last year.

At the beginning of the year the operator had claimed that it served 100 million subscribers in the first 170 days of its operations. But 28 million of these decided to quit the Reliance Jio network after the company stopped providing free services.

Jio last September caused enormous disruption by offering consumers free voice services for life, and free data over the first three months. Although it was able to extend the availability of its free offers until the end of March, India's regulator recently asked it to discontinue its free services following complaints from other operators in the country.

Ratings agency Moody's has since weighed in with an assessment of what Jio could be earning from its paying customers. According to its calculations, if all 72 million customers each paid about INR303 Indian rupees ($4.72) per month (the basic rate Jio is charging) between July 2017 and March 2018, Jio could expect to make about INR213 billion ($3.32 billion) in revenues. Market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) (which is set to be overtaken by a merger between number two and three players Vodafone India and Idea Cellular Ltd. ), made about INR436 billion ($6.79 billion) in the nine months to December 2016, by way of comparison.

Subscriber take-up also means that Jio will be credit positive, even if it will "remain a drag on [parent company] Reliance Industries' cash flows for at least two to three years," says Moody's note. It also indicates that capital expenditure will be a huge burden for Jio as it rolls out its network. The operator expects to invest about INR150 billion ($2.34 billion) in capex on an annual basis.

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Because it is a new player in the market, Jio will need to focus on maintaining quality at all levels to retain customers and attract new ones. This is going to be especially important as the incumbent telcos expand their own 4G networks and offer competitively priced tariffs.

"The incumbent telecom operators are already expanding their 4G network coverage and are lining up price plans to compete with Jio's offerings," says Moody's. "As a result we anticipate a heightened state of competition will persist at least for the foreseeable future."

What's more, the number of people opting for mobile number portability has not risen since Jio's launch, giving rise to suspicion that most of customers are using Jio's SIMs as additional or secondary ones. On average, between four and five million subscribers opt to port out their mobile numbers every month. Regulatory data shows that this has remained more or less constant since Jio entered the market.

It seems that Jio might have to come up with an even more aggressive marketing strategy if it is to build and secure its customer base.

— Gagandeep Kaur, contributing editor, special to Light Reading

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