By targeting the top 120 mn users, we think Reliance Jio is looking to extract Rs.300-500 to provide a good user experience at relatively cheaper price per MB ? higher than industry average voice ARPUs. The hope is that favorable demographics, rising affordability and the global trend of data growth encourage increasing usage.
There are significant concerns around Jio's likely pricing, which is expected to be very aggressive. We believe Jio will offer larger data bundles in their mobile plans (3x to 4x the current level), but it is unlikely to disrupt price points currently prevalent in the marketplace. Reducing price points could lower the revenue table for the industry ? a risk which even Jio cannot afford. Jio?s key goal is to stimulate data usage manifold, which would result in the rapid ramp-up of data throughput in its network. With its massive scale at launch, this usage growth should translate into a falling trend in the unit cost of data, which will be key to Jio?s achievement of a competitive position in the long term.
Jio assess that a large and growing segment of population in India is willing to pay for good connectivity and a digital eco-system ? something core to their proposition. The company in its 1Q presentation highlighted that there were over 235mn subs in 2008 with ARPU of Rs.627 (adjusted for inflation and real increase). Additionally, it is likely to offer flexible tariff plans and look to promote higher data usage through a wide offering of services and applications such as Jio Chat, Jio on Demand and Jio Play.
