Reliance Jio takes on competition again as price war intensifies
The Double Dhamaka plan offers 252 gigabits (GBs) of data (3GBs per day), unlimited voice calls and SMSes at Rs 399 for 84 days.
The Mukesh Ambani-controlled Reliance Jio is showing no signs of cooling off. The war waged by Jio, starting September 2016, continues to intensify. In a recent salvo, Jio has sweetened the deal with its cheapest data. The "Double Dhamaka" plan offers 252 gigabits (GBs) of data (3GBs per day), unlimited voice calls and SMSes at Rs 399 for 84 days. The telco has tied up with Flipkart-owned PhonePe where it's offering Rs 100 cash back on this recharge plan. The plan is valid for recharges in June.
The comparative plans of Airtel and Vodafone seem to be less attractive. For instance, Airtel is giving 114.8 GBs of data (1.4 GB per day), unlimited voice calls and SMSes at Rs 448 for 82 days. Vodafone India is offering 117.6 (1.4 GB per day), unlimited voice calls and SMSes at Rs 458 for 84 days.
In a country where consumers are obsessed with discounts and cashbacks, there's no guarantee that the existing customers of Vodafone India and Airtel will stick to their operators. On the back of its highly-competitive plans, Jio has garnered a subscriber market share of 15.76 per cent in March 2018. Its subscriber base stood at 18.65 crore as compared to market leader Airtel's 30.41 crore and Vodafone India's 22.26 crore. Jio's net customer addition was highest in March at 9.4 million.
Jio has been continuously lowering its tariffs in both prepaid and postpaid segments since its launch, testing the strength of its bigger rivals. For instance, Jio launched Rs 199 postpaid plan last month that offers unlimited voice calls and 25 GBs of data for a month. This plan is targeted towards poaching high-value subscribers of rivals.
However, keeping tariffs at low levels will surely put pressure on the financial performance of the company. In 2017/18, Jio posted Rs 722.96 crore net profits on revenues of Rs 20,158.34 crore. Jio posted net losses of Rs 31.37 crore in the fiscal before that.
Jio has already sunk in an investment of about $31 billion with plans to pump in more money to expand the network. In March, its board approved raising up to Rs 20,000 crore by issuance of debentures, and in the following month, the telco raised some Rs 3,250 crore samurai loans - which bear lower interest rates than borrowing rates in India - from Japanese banks.
When offerings don't match on the tariffs front, the biggest differentiator for incumbents could be the network strength and coverage but even there, experts argue, Jio has an advantage of having a relatively newer network, particularly active infrastructure, as compared to its rivals. But as it acquires the wireless business of Reliance Communications, a significant part of its network will require upgrading.