Jio-triggered telecom competition declining; ARPU improving

Tariff differential between Rjio and old players dwindling


MUMBAI: India’s telecom sector has started maturing on all fronts commercially with the average revenue per user (ARPU) improving and the intensity of competition in the industry declining thus ensuring an improved bottom-line for all players in the future.

India Ratings and Research (Ind-Ra) views that Reliance Jio Infocomm Ltd’s (RJio) recently announced post-paid plans indicate the telco’s continued steps towards improving the industry-level average revenue per user (ARPU).

The entry of RJio about four years ago had triggered a fierce competition in tariff among telecom players leading to the exodus of several players leaving only two from the incumbent players – Airtel and Vodafone Idea (following the merger of both). This has also resulted in steep fall in the ARPU of the existing players pushing them into losses.

The tariff differentiations among telcos – RJio, Airtel and Vodafone Idea Ltd (VI) – have been gradually thinning away over the past nine to 12 months, indicating declining competition intensity, according to Ind-Ra.

“RJio’s plans do not threaten the post-paid customer base of Airtel and Vodafone Idea due to sticky nature of customers and similar content offerings,” the agency noted.

Structurally, Ind-Ra believes that green-shoots are visible in the sector, owing to the alleviation of regulatory risks and moderation in competitive intensity in 2020-21 (FY21), compared with the past two to three years.

ARPU growing

The tariff of RJio’s post-paid plans is almost double of its existing plans. Post-paid plans are typically priced at 12 per cent-20 per cent premium over pre-paid plans (for the same validity period).

“Therefore, any increase in the proportion of post-paid subscriber base in the overall base of telcos will be ARPU accretive,” Ind-Ra argued.

Although the shift from post-paid plans to pre-paid plans might not lead to an immediate spike in ARPU in the near term, since post-paid subscribers represent only around 5 per cent of the total subscriber base, the move indicates that structurally ARPU has started improving, as also evident over the past nine months.

Reducing Competition

The difference among the tariffs offered by three telcos- RJio, Airtel and Vodafone Idea is also reducing gradually for both pre-paid and post-paid plans.

RJio had reduced the discounts offered in its pre-paid tariffs from the tariffs offered by Airtel and Vodafone Idea to 25 per cent in December 2019 from 33 per cent two years back.

The tariff differential between the prepaid plans of RJio from the pre-paid plans offered by Airtel and Vodafone Idea is now 25 per cent for the 84 days and 28 days validity plans, while the plans for 56 days validity have become much more comparable.

Limited threat to Airtel, Vodafone Idea

The tariffs of RJio’s post-paid plans are at about 20 per cent discount to similar plans of Airtel and Vodafone Idea. However, it may not lead to any customer churn for these two players as on the one hand, post-paid customers are generally sticky in nature, and on the other Airtel and Vodafone Idea (VI) already have similar plans or they can tweak their existing plans to match RJio’s content offering (e.g. free subscription of over the top platforms).

At the industry level, the mix of post-paid and pre-paid plans may not change, given the premium pricing required to be paid for these plans compared with price-sensitive voice-only customers.


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