Reliance Jio will continue to give tough competition to telecom operators, says Care Ratings

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According to a report by Care Ratings, with this new offer, (Summer Surprise) Reliance Jio will continue to give a tough competition to the telecom operators that already witnessed hardship due to Reliance Jio's free services in the December 2016 quarter.

Reliance Jio will continue to give tough competition to telcos

"The surprise move by Reliance Jio will continue to add more subscribers to its base. However, after the month of July 2017, some moderation is expected in the number of telecom subscribers," the agency said.

The company has recently announced has announced its new offer 'Summer Surprise' for its JIO PRIME members.

Every JIO PRIME member, when they make their first paid recharge prior to 15th April using Jio's Rs. 303 plan (or any higher value plan), will get services for the initial 3 months on a complimentary basis. The paid tariff plan will be applied only in July, after the expiry of the complimentary," Jio said in a statement.

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Meanwhile, the company has also extended its Prime membership services until 15th April.

The agency said, " Reliance Jio which was expected to charge for its services from 1st April 2017 extended the deadline for buying Jio's Rs.303 (and other) plans until 15th April 2017. Those subscribers who buy Rs. 99 prime membership till 15th April 2017 and subscribes to plans of Rs.303 or higher will be eligible for the Summer Surprise offer." Adding that, prior to announcement of Summer Surprise offer, a subscriber could buy prime membership only till 31st March 2017 and could make a recharge of any of the plans (Rs. 149, Rs. 303, etc.) for a month for its chargeable services from 1st April 2017.

"Reliance Jio's free services not only affected the industry's sales but also profits in the December 2016 quarter. The aggregate sales of nine telecom companies that grew in single-digit in each of the quarters during June 2015 quarter to September 2016 quarter declined by 1.1 percent in the December 2016 quarter. Likewise, the industry's performance remained subdued on the profitability front," it added.

The industry's operating margin stood at 28.43 percent and net margin stood at 0.34 percent in the December 2016 quarter. The profitability reported by the industry was weakest compared to each of the past six quarters.

"Nevertheless, going forward, we expect the growth in data usage by subscribers to drive the telecom industry's growth. Also, the new norm of bundled voice and data packages is expected to increase the Average Revenue per User (ARPU) of telecom companies in the coming years. However, any more surprises may put some pressure on the ARPU of telecom companies" the credit rating agency further added.

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