The telecom division of Reliance Industries Limited (RIL), Reliance Jio Infocomm Ltd., appears to be aiming for market share in the wired broadband sector. It has also announced a new plan called “Broadband Back-up,” which is only available to new customers and starts at Rs 198 per month. Jio provides unlimited data at 10 megabits per second and unlimited voice calls without bundled over-the-top platforms in this location. In addition, it provides additional plans for speed and entertainment enhancement.
According to analysts at JP Morgan India, “We see this as another sign of pricing aggression for our fiber business focused on acquisitions and TAM (total addressable market) expansion.”
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Jio held a 24 percent share of the wired broadband market with 7.65 million customers as of December 31. Keep in mind that the new plan goes live just in time for the start of the Indian Premier League, for which RIL owns the digital streaming rights.
In a March 27 report, analysts at BofA Securities stated, “In our view, Jio is looking to replicate its mobile strategy to facilitate the transition at very low cost.” Many people switched to Jio as their primary SIM over time.
The current base plan from Bharti Airtel Ltd. costs Rs 499, while Jio’s plan costs Rs 198 per month. However, keep in mind that Airtel’s plan offers speeds up to 40 mbps. Also, because it’s a new idea with a broadband connection for a second home, it might need to be promoted more to get people who already use it to use it, according to a Jefferies India report from March 28. loss of market share. According to him, a 20% conversion rate could bring Jio an additional 3 million broadband customers.
However, RIL cannot move the needle because the wired broadband segment is too small. Additionally, there will be a low average revenue per user (ARPU). On a consolidated basis, analysts at BOFA anticipate that fixed broadband will contribute less than 1% to 2% of revenue/Ebitda for RIL, limiting the impact on earnings per share. Earnings before interest, taxes, depreciation, and amortization are all included in Ebitda.
However, the question of whether Jio’s move will result in an increase in its customer base is irrelevant. It could not be simpler. The Jio basic broadband plan is appealing. However, considering that home broadband is supposed to be faster, a speed of 10 mbps is not very comforting. An mobile hotspot can also provide this speed,” Ambit Capital analyst Vivekananda Subbaraman stated.
In light of this, it is unknown if Airtel will respond by lowering the prices of its broadband plans. In the nine months that ended in December, the home services segment of the company, which includes broadband services, contributed approximately 4% of its revenue from India.
Sure, broadband customers tend to stick around longer, and their Arpu is higher than in the mobile market. Therefore, even if Jio or Airtel are able to expand their respective subscriber bases, this will help revenue growth marginally.
In the meantime, investors in telecom stocks are anticipating a mobile tariff increase.
Shares of RIL, Airtel, and Vodafone Idea Ltd. are down 22%, 14%, and 49% from their 52-week highs, respectively, and this is expected to be a major catalyst. However, with the intensity of competition increasing, the prospects for growth appear dim. Vodafone Idea is particularly vulnerable in this scenario.
“While negative for the sector, the delayed tariff hike will do the most damage to Vodafone Idea’s survival hopes, and could effectively lead to a monopoly, resulting in the bankruptcy of Bharti and R-Jio,” states Kotak Institutional Equities. could lead to rapid increases in their market share.
