Jio to stop giving promotions, discounts from 2018

New Delhi: Reliance Jio is likely to shift its approach from a hunter to a farmer. In 2018, when Jio will have a critical 200 million subscribers then it will gradually and slowly stop giving promotions and discounts, said Nitin Soni, Director at Fitch Ratings.

“Presently, the telecom operator is hunting for a large subscriber base. While it has already 139 million subscribers, it is expected to achieve about 200 million subscribers by 2018,” said Soni.

“From 2018, Jio will change from a hunter to a farmer and will start making money on their $30 billion investment,” he added.

Soni further said that the incumbents like Bharti, Vodafone and Idea will also benefit from the rational price in the industry.

Talking about pricing or tariff, Soni said the average tariffs have been on the decline from the last four to five years. “And recently with the entry of Reliance Jio, the blended average revenue per user has rapidly declined because of lower data tariff and voice being cannibalised by data.”

Asked if rationalisation of pricing will adversely impact Jio’s customer retention, Soni said: “Jio in the short term will remain very aggressive. It will continue to offer discounts and promotions, the cheaper handsets and other marketing strategies to increase its subscribers’ base.”

Right now the challenge in front of Jio is to amass the larger subscriber base. It will try to poach in the subscribers which have already exited smaller telcos, like Tata and Telenor. And probably some subscribers from incumbents like Bharti, Vodafone and Idea as well.

“In some quarter there could be bit of a decline in ARPU (average revenue per user) and Jio will give some more discounts and given the whole industry nature, it is a prepaid market you always have to be really aggressive. But I think overall the industry structure is corrected and three large players are there, I do not see them killing each other further to gain more subscribers,” he said.

He thinks these three players in the medium term will start making healthy profit and will return back to a rational kind of competition in the sector.

“Now Jio’s offering is slightly cheaper than the incumbents. It is not very different now. I think the top three players’ tariff would be around Rs 140-150 levels. But I think going forward the telco which will provide a good quality of data to their subscribers, the subscribers will naturally move to that. Pricing will be more or less same for these three telcos,” Soni added.