Reliance Jio effect: Airtel, Voda and Idea could lose 10% of premium users

The unlimited Rs 303 data plan for Reliance Jio prime members with free voice is expected to dent the premium subscriber base of the sector including those of the big three – Bharti Airtel, Vodafone and Idea Cellular –to the tune of 17 per cent. This is assuming that the premium data subscribers pay an average of Rs 600 per month. While there are about 350 million data subscribers, about 100 million are in the premium category.

Analysts at Motilal Oswal Securities say that if the downtrading were to happen from the higher average revenue per user (ARPU) level of Rs 600 to Rs 303, the sector will be impacted to the tune of Rs 35,640 crore a year. The larger players will be affected more as their ARPUs are much higher than the Rs 303 tariff of RJio.

Of Bharti Airtel’s overall subscriber base of 266 million, about 55 million are data subscribers who pay an average of data ARPU of Rs 174.7. Vodafone and Idea have a data subscriber base similar to Bharti Airtel and data ARPU of Rs 111-118. Operators do not reveal the proportion of premium subscribers.

The impact, however, could be offset as there could be some uptrading as well. While the premium subscribers could be in the Rs 500 and above bracket, analysts say there would be some proportion of subscribers in the Rs 200-Rs 300 range who may want to up trade to the unlimited offering. Thus the net impact could be 8-10 per cent, feel analysts.

The end of freebies is a positive for the sector as operators can now plan their response and long-term strategy. Currently, Bharti Airtel unlimited postpaid plans start at Rs 549 which includes unlimited voice calling and 6GB of data. They will have to tweak this to match RJio’s attractive offer thus putting pressure on their data ARPUs especially those at the higher end.

Stocks of Bharti and Idea Cellular are in the green given that uncertainty has come to an end. RIL investors too welcomed the move to turn Jio into a paid service and pushed the stock nearly 10 percent cent on Wednesday.