Reliance Jio has a target of achieving 100 million subscribers by March 2017. Though this was doubted by many, with the free voice and data offers, it seems like Reliance Jio Infocomm might reach the targeted subscriber base, states Nitin Soni, Fitch Ratings' Director.
He further stated that the subscriber base might shrink considerably once the telecom operator ends the freebies and starts charging customers for their usage. It is said that Reliance Jio is adopting a great strategy of providing freebies until March to strengthen the subscriber base. As of now, the service provider has 52 to 55 million subscribers and has the potential to touch 100 million users by the end of March 2017.
Eventually, as long as the Jio service is free, a customer using Airtel, Vodafone, Idea or any other network will get a free Jio SIM to make use of the free services until March 2017. When Jio will start charging for its services from April 1, 2017, they might witness a drop in the subscription base by 5 to 10 percent, he stated.
Despite that there will be a drop in the number of subscribers of Jio after March 2017, he added that customers of Jio might decide whether to use the Jio SIM or retain their existing SIM based on the price. They will figure out how much they will pay per month to the service provider, and if Jio is cheaper, then they might move to Jio.
However, he further stated that Jio might come with a new set of offers after the three-month period to attract the subscribers towards its service in an attempt to avoid losing the premium subscribers. When it comes to the telecom space in India, Soni added that the industry can't afford over four or five participants.
With the entry of Reliance Jio, the competition in the industry has become intense. In fact, the competition is at its peak now. The consolidation is happening in the telecom industry as RComm has acquired MTS and merged with Aircel. At this point in time, some weaker telecom service providers are looking forward to exist the market. Soni added that they are expecting to see more consolidation in the industry.
He believes that Idea Cellular might face many challenges as it lacks 100 percent 4G spectrum asset across the country. They might also attempt a merger or acquisition to strengthen the competition. It goes without saying that a new entrant will leave a negative impact on the weaker telecom companies. Eventually, he said that Idea is believed to be affected within 12 to 24 months.
Viewing the outlook of the sector as negative in 2017, he stated that the data tariff will drop by 15 to 20 percent due to the competition created by Jio. But, Airtel with a spectrum asset on 900 MHz is a well established player that can compete against Reliance Jio.