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4G deals ahead of Jio entry, with more data for same tariff

Companies will prefer to incentivise their customers not by lowering tariff, but by offering higher data downloads for the same price, in a bid to protect their average revenue per user
Microsoft

Attractive deals for consumers in India’s 4G data telecom space are expected to continue, ahead of the commercial launch of Reliance Jio, ranging from better handsets at lower prices and more data limits at existing tariff, according to analysts and top brokerages.

But companies will prefer to incentivise their customers not by lowering tariff, but by offering higher data downloads for the same price, in a bid to protect their average revenue per user, the research papers add.

This apart, the analysts feel, the launch of Reliance Jio cannot be far away, with some even predicting it to be August 15 to coincide with India’s Independence Day. Companies like Bharti Airtel, Idea and Vodafone have already firming up plans to counter the challenge.

Here are some excerpts from what the brokerages have said on current state of play in India’s 4G data telecom market:

Bank of America Merrill Lynch: India could see a capacity war and not a price war. In our view, Jio could focus on offering more data at the same price rather than lowering average revenues per user, as such a move would impact their ability to garner a return from its business.

We expect incumbents to match Jio’s tariff by also offering more data at the same price.

UBS: We agree that the Reliance Jio launch has the potential to further disrupt mobile data tariffs, we think there is a high likelihood that the entry of Reliance Jio will also expand the size of the market significantly.

We believe that India’s mobile data market is likely to grow 8 times (to Rs 2,133 billion) by FY26, driving strong operating leverage.

Citi Research: With Reliance Jio’s commercial launch imminent, increase in data allowance to pre-empt the likely aggression by Jio wasn’t unexpected. Data network utilization for telcos is currently low and therefore we believe that telcos should be able to handle any spurt in usage.

Morgan Stanley: We expect Reliance Jio launch to be market disruptive leading to a price war. 1.5 million users on Jio’s network already account for impressive 20 per cent of data market volumes, though currently uncharged.

Credit Suisse: Our recent research showed Reliance Jio will be hitting the market with the largest network by capacity. The extension of Jio promo offer to Samsung phones is to be seen as a progression of the launch.

CLSA: The company is reportedly extending this further to select Apple and HP handsets and more such announcements are likely as Jio completes testing. We expect higher acceptance of this offer among users of dual-sim 4G handsets. Reliance Jio has also integrated 800MHz spectrum acquired from Reliance Communications in nine of 13 circles and expects to integrate the spectrum in the remaining four circles over the next few weeks, after which commercial launch can be expected.

HSBC Global Research: Data revenue growth has slowed for incumbent telecom companies over the past two quarters and some pricing intervention was very likely. However, instead of cutting tariffs, which, in our view, would have been clearly negative, telcos have increased data limits and attempted to drive both penetration and average revenue per user (ARPU). In our view, recent pricing auctions may have some marginal impact on data revenue growth in the near term, but in the medium term we see them having a positive impact on data revenue growth.

Kotak Institutional Equities: We believe the recent price cuts announced by Bharti Airtel and Idea Cellular on select data packs have two clear strategic intents — shift the belly of the data market right by substantially improving the price-value equation of higher usage, higher ARPU packs, and fatten the tail by improving the price-value equation of the entry-level trial/sachet packs.

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