JIO has been paying IUC of ~Rs6bn per month in its largely urban network with smartphone subscribers. With this cut, JIO?s IUC net
outflow to the rest of the telcos will fall sharply. Whether JIO ploughs back these gains or retains them would depend on a number of factors.
JIO?s smartphone plans are at a deep discount to the market, but its feature phone plan is on par or even at a premium to the ARPU of featurephone users. One can argue that JIO can gun for higher market share at a faster pace by cutting prices, and one that objective is achieved, attempt to take prices up gradually. Indeed, JIO?s entire strategy has been based on this ? a steeply discounted entry followed by consolidation.
Further, JIO's (largely urban) network utilisation is quite substantial. Demand has proved to be robust with subscriber adds of more than 5m per month consistently even after a recent tariff hike ? these two factors hardly paint a circumstance in which JIO will gain by dropping prices. Incremental rollout is going to be largely towards the rural/featurephone offering.
In rural areas, JIO?s feature-phone push is likely to be constrained by handset supply. We understand that JIO is attempting to raise
manufacturing capacity anticipating healthy demand, and this at the announced price of Rs153/28 days pack that offers 0.5GB/day and
unlimited voice. It is possible that JIO could introduce a lower denomination pack later to expand the addressable feature phone
market, but supply constraints will make this a lesser priority.
