Can Reliance Jio Launch 4G-LTE Data / Broadband at 50% Discount to Incumbents ?

Reliance jio Infocomm Launch Data RatesIn our previous report we have analyzed the need for disruption by Reliance Jio Infocomm in the Indian Telecommunications space. Today we’d like to throw some light on what will likely happen to the Hottest Area of Telecom – Mobile Broadband / Data Services if Reliance Jio were to launch at 50% discount to incumbent players.

The current realization is 25-29 paise/MB for incumbents; this is not the most aggressive disruption assumption), it would mean R-Jio starts selling at 15 paise/MB. Current 3G usage in India (on a base of around 52 mn subs) is around 500 MB/month and 3G data ARPU is around Rs 125-130/month.

Two to Three years hence, if we assume demand of per annum usage of 36 GB/sub or a per month usage of 3GB [We are assuming that R-Jio offers voice as an OTT utility as primary means of service and hence the higher data usage]. At an ARPU level, this implies an ARPU of Rs 450/month on a base of say 100 mn subscibers. However, can a lion’s share of such subs end up with a single player? Unlikely, in our view. Higher price disruption would place higher demand on required volumes and make the business case even more challenging.

What does Disruption in 2G Voice in India Tell us ?
Dare Devil Challengers like Uninor, Tata DoCoMo, etc entered the Indian Voice space with a business case based on high capacity utilization assumptions can drive suboptimal pricing decisions. However, none of the challengers, could reach the voice volume levels demanded by their volume-centric business cases. ‘How much can I produce’ is not a relevant question for a new player; ‘How much can I sell’ is. This is also why one needs to be careful when assessing cost/MB for R-Jio or any new player;

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