The Mukesh Ambani-owned operator is working out a new tariff plan which will be valid till June 30, said people familiar with the developments in Jio as well as analysts. Unlike the earlier free offers that incumbent telcos have termed predatory, the latest introductory offer will charge a fee of about Rs 100 for data, while voice will be free. “We have to start making revenue,” one of the persons mentioned above said. Jio did not respond to emailed queries sent by ET.
The company’s free voice and data offers have attracted over 72 million subscribers in four months after its commercial services were launched on September 5 last year. India’s top telcos, Bharti Airtel, Idea Cellular and Vodafone India, have been forced to slash data and voice rates – even offering voice for free under some plans – to counter the aggressive pricing offered by Jio. The newest entrant offers only 4G services and has claimed its affordable services will trigger a mass adoption of data as its production costs are a fraction of that of its competitors.
Instead, a nominal charge will help Jio test its subscribers for stickiness, and will also get an indication of a suitable price point when it finally starts charging at market rates.
“We expect many will go back to using their primary number if the (free) offer is withdrawn, and Jio could well lose over half its subscribers if it starts charging more without fixing the call drop problem,” said Chris Lane, a senior analyst at US brokerage, Bernstein. Offering a nominal price for data – lower than what it had announced in September -with voice free may prevent a sharp drop in customers, and the operator can still start its payment cycles, said analysts.
“But it has to come up with cheaper tariff because other incumbents have already launched reduced packs. This price war is a burden on the company (telcos) and the government loses on licence fee as well,” said an analyst who preferred anonymity.
Just last week, Reliance Industries decided to infuse Rs 30,000 crore into Jio to expand its network, in addition to the Rs 1,71,000 crore it has already invested. Jio’s gross debt stood at Rs 49,000 crore as of December 31, 2016, with deferred payment liability of Rs 21,000 crore to the government for spectrum purchases.