Akash Ambai led Reliance Jio Infocomm is all set for public launch within the next couple of months. Before we dive into the details on how and why Airtel / Vodafone are the most vulnerable operators let us quickly look into data with ears on the ground.
Jio will launch with about 75,000 Cell Tower Locations and about 20,000 Small Sites / WiFi Spots. Target Locations of Launch – Metro Cities, Urban Centers and Semi-Urban Towns. Rural is excluded in the initial public launch and there are no Jio 4G signals in rural areas.
With such a Network Arrangement, Jio’s addressable market is 400 Mn Wireless Consumers in the above said geographical areas. How are these consumers stacked up ?
The Top 40 mn consumers are the high-end mainly single SIM users. In our view, they will not use dual SIM smartphones nor will they opt out for MNP (Mobile number portability) to port out from incumbent telcos. We consider these consumers sticky and believe that it would be difficult for Jio to poach these consumers. As these consumers contribute to a large part of revenues for incumbents, we note that in the event of a price war, incumbents will reduce tariffs for these consumers and prevent them from being poached.
The next 80 mn users who are high-end prepaid users to be the likely target base for Jio. These consumers are on prepaid SIM by choice (as they want to prevent the bill shock) and are comfortable using multiple SIMs. We think that a majority of the consumers in this bucket will likely try using Jio SIM and if happy with the quality/coverage of Jio would stick with Jio.
The next 100 Mn users are early users of data (mainly using 2G data) and likely spend around Rs 200 or less as a total ARPU. As Jio is looking to target consumers with Rs 300 or more as an ARPU, this may not be the immediate target base for Jio in April 2016. However, they will be the target at a later date when Jio may adopt a plan to graduate them directly to 4G from 2G.
How will Jio’s Launch Impact Vodafone /Airtel ?
Airtel’s Revenue Market Share in Metro and Circle A are – 31% and 32% respectively.
Vodafone’s Revenue Market Share in Metro and Circle A are – 35% and 22% respectively.
We consider most of these top 400 mn consumers to be mainly in Metros and Circle A (and partly in Circle B). We note that Airtel and Vodafone have higher revenue market shares in these areas than Idea and thus we believe that Airtel / Vodafone are more vulnerable than Idea in the initial year of Mobile Data broadband Boom post launch of Jio 4G LTE.