Reliance Jio's tariffs has become the hottest topic in the Indian media since the chairman of Reliance Industries announced the same at the company's AGM yesterday. While everyone is going ga-ga over how Revolutionary or Game-changing the tariffs are, there are people like me who are somewhat disappointed. While I was expecting Reliance Jio's tariffs to be focused on the Data user with Voice being offered as an additional VAS, the actual tariffs seem to be focused on Voice user with Data as a VAS. Yes, it is being highlighted everywhere that Reliance Jio will NOT be charging for Voice Calls being made to anywhere in India, not even on Roaming, that certainly Does Not mean that a customer with an active Sim card will be allowed to make any number of calls without Recharging with any of the 10 Plan options. In a way what Reliance Jio has done is that it has bundled Unlimited Voice calling in all it's Plans. The Plans are designed to include charges for both Voice & Data & SMS. Not just that....most of the 'supposedly Big' tariff announcements are just means to fool people into believing that they are being offered something out-of-this-world.
The 'Supposedly Big' annonucements are:
* Free Voice Calls to anywhere in India, even on National Roaming.
* Data at just Rs.50 per GB
* Free subscription to Jio Apps worth Rs.15,000 till December'2017
* Free unlimited 4G Night Usage
Now let's look at the real picture. The following image shows all the Jio's tariff plans announced by Reliance Industries via a Press Release:
Let's look at it point wise:
* Free Voice Calls to anywhere in India, even on National Roaming: Voice calls are Free only after a subscriber has paid for either of the 10 plans. For Example: Suppose a subscriber recharges for the smallest plan, i.e. Rs.19, which is valid for 1 day. He will get to make Unlimited Voice Calls only for that day. He won't be able to make any calls the next day, until he recharges again. That means Voice Calling is bundled in the Plan charges. It's an excellent deal for someone who loves talking a lot on the phone. Jio will certainly hope that most of the Voice Calls are made within the Jio network and for that to happen it will have to scale up the Subscriber base at a very rapid pace. For every call that is made to another network, Jio will have to bear the Interconnect Cost of 14 paise/min. To compensate for this, Jio will hope that it also receives an equal number of calls from other networks, especially after it has built a substantial user base. I don't think that will happen until other operators too start offering Free Unlimited Calling under some affordable plans. With the cheapest 28-days plan of Rs.149, Jio will earn a revenue of little over Rs.5 per day. Hence Jio can maintain Free Voice Calling only if the Average Calls per user per day to another Network remain under 25 minutes or so. As per information available, as of now the Average number of outgoing calls made per user per day is around 15 minutes. I think Jio subscribers will make lot more calls as it's free. Hence Jio certainly needs to not just ramp up it's subscriber base, but it also needs to ensure that subscribers use their Jio number as their Primary contact number. From a subscriber's point of view, it's a bonanza for anyone who currently spends over Rs.200 per month only on making Voice Calls. Rival operators too will tinker their Voice Call charges or their STVs to minimize loss of Voice traffic.
* Data at Rs.50 per GB: This rate is true only if we consider the WiFi Data limits, not for 4G Data limits. Even on the most expensive plan, which offers 4G Data of 75 GB for Rs.4999, the rate comes to about Rs.67 per GB. Majority of the population cannot afford anything more than the Rs.499 or Rs.999 Plan, where the Data rate comes at Rs.125 and Rs.100 per GB respectively. These rates are certainly not cheap. These plans will look attractive to only those who have regular access to JioNet's WiFi Hotspots as each of Jio's Plans (other than the Rs.149 plan) comes bundled with WiFi Data limits that are double of the respective 4G Data limits. Jio claims to have a million WiFi Hotspots active currently, but all of them are mainly in highly active Public places in Urban areas. People who frequently move in such areas will certainly find Jio's tariffs attractive. But it's a useless feature for people living in smaller towns or rural areas. And also for people who are dependent on Wireless Data service and consume substantial Data while at home and not at work. A major chunk of Data usage for most Indians happens while at home. All such people are not going to find these tariffs attractive, unless someone is highly lucky to be receiving a JioNet WiFi signal at their residence.
* Free subscription to Jio Apps worth Rs.15,000 till December'2017: This is One Big Joke!!! Take a closer look at the Tariff card shared above. It clearly says that Data used for Jio Apps, Video Calls and other content on the Internet will be debited from the Data allocation for the Plan. Then how does Jio Apps subscription become Free as a user will be charged for Data used for the same. And claiming it to be worth Rs.15,000 for the year is only the matters worse!! Amongst the Jio Apps, the main focus of most people is on JioCinema, JioTV and JioMusic. While Music streaming could consume about 2-3 MB per minute, the Video Apps consume about 15-20 MB per minute. That means a person can listen to about 300-400 minutes of Music per GB or watch 50-60 minutes of Video per GB. I seriously think that the usage of these Apps will collapse substantially from 1st January when Jio starts charging all it's users. Not many people will use these Apps on Jio's 4G network from 1st January. My earlier expectation was that Jio will offer the Apps bouquet for something like Rs.300 to 400 per month, which will also include the Data consumed by these Apps. But my expectations were probably just way too optimistic.
* Free unlimited 4G Night Usage: Look at the Night Usage timings in the above tariff card. A 3-hours window between 2 am to 5 am, when 99% of the population is fast asleep, is another big joke. Earlier I used to ridicule the 12 midnight to 6 am Night Usage timings set by the incumbent operators for some of then 3G/4G plans and was happy that atleast Tata Tele had set a more sensible timing of 11 pm to 7 am. But after looking at the timings set by Jio, even the incumbent operators start looking much much more lenient. Only a very very small percentage of Jio's subscriber base will be able to make good use of the Unlimited Night Usage feature. For all others, it's as good as non-existent feature.
The 'Supposedly Big' annonucements are:
* Free Voice Calls to anywhere in India, even on National Roaming.
* Data at just Rs.50 per GB
* Free subscription to Jio Apps worth Rs.15,000 till December'2017
* Free unlimited 4G Night Usage
Now let's look at the real picture. The following image shows all the Jio's tariff plans announced by Reliance Industries via a Press Release:
Let's look at it point wise:
* Free Voice Calls to anywhere in India, even on National Roaming: Voice calls are Free only after a subscriber has paid for either of the 10 plans. For Example: Suppose a subscriber recharges for the smallest plan, i.e. Rs.19, which is valid for 1 day. He will get to make Unlimited Voice Calls only for that day. He won't be able to make any calls the next day, until he recharges again. That means Voice Calling is bundled in the Plan charges. It's an excellent deal for someone who loves talking a lot on the phone. Jio will certainly hope that most of the Voice Calls are made within the Jio network and for that to happen it will have to scale up the Subscriber base at a very rapid pace. For every call that is made to another network, Jio will have to bear the Interconnect Cost of 14 paise/min. To compensate for this, Jio will hope that it also receives an equal number of calls from other networks, especially after it has built a substantial user base. I don't think that will happen until other operators too start offering Free Unlimited Calling under some affordable plans. With the cheapest 28-days plan of Rs.149, Jio will earn a revenue of little over Rs.5 per day. Hence Jio can maintain Free Voice Calling only if the Average Calls per user per day to another Network remain under 25 minutes or so. As per information available, as of now the Average number of outgoing calls made per user per day is around 15 minutes. I think Jio subscribers will make lot more calls as it's free. Hence Jio certainly needs to not just ramp up it's subscriber base, but it also needs to ensure that subscribers use their Jio number as their Primary contact number. From a subscriber's point of view, it's a bonanza for anyone who currently spends over Rs.200 per month only on making Voice Calls. Rival operators too will tinker their Voice Call charges or their STVs to minimize loss of Voice traffic.
* Data at Rs.50 per GB: This rate is true only if we consider the WiFi Data limits, not for 4G Data limits. Even on the most expensive plan, which offers 4G Data of 75 GB for Rs.4999, the rate comes to about Rs.67 per GB. Majority of the population cannot afford anything more than the Rs.499 or Rs.999 Plan, where the Data rate comes at Rs.125 and Rs.100 per GB respectively. These rates are certainly not cheap. These plans will look attractive to only those who have regular access to JioNet's WiFi Hotspots as each of Jio's Plans (other than the Rs.149 plan) comes bundled with WiFi Data limits that are double of the respective 4G Data limits. Jio claims to have a million WiFi Hotspots active currently, but all of them are mainly in highly active Public places in Urban areas. People who frequently move in such areas will certainly find Jio's tariffs attractive. But it's a useless feature for people living in smaller towns or rural areas. And also for people who are dependent on Wireless Data service and consume substantial Data while at home and not at work. A major chunk of Data usage for most Indians happens while at home. All such people are not going to find these tariffs attractive, unless someone is highly lucky to be receiving a JioNet WiFi signal at their residence.
* Free subscription to Jio Apps worth Rs.15,000 till December'2017: This is One Big Joke!!! Take a closer look at the Tariff card shared above. It clearly says that Data used for Jio Apps, Video Calls and other content on the Internet will be debited from the Data allocation for the Plan. Then how does Jio Apps subscription become Free as a user will be charged for Data used for the same. And claiming it to be worth Rs.15,000 for the year is only the matters worse!! Amongst the Jio Apps, the main focus of most people is on JioCinema, JioTV and JioMusic. While Music streaming could consume about 2-3 MB per minute, the Video Apps consume about 15-20 MB per minute. That means a person can listen to about 300-400 minutes of Music per GB or watch 50-60 minutes of Video per GB. I seriously think that the usage of these Apps will collapse substantially from 1st January when Jio starts charging all it's users. Not many people will use these Apps on Jio's 4G network from 1st January. My earlier expectation was that Jio will offer the Apps bouquet for something like Rs.300 to 400 per month, which will also include the Data consumed by these Apps. But my expectations were probably just way too optimistic.
* Free unlimited 4G Night Usage: Look at the Night Usage timings in the above tariff card. A 3-hours window between 2 am to 5 am, when 99% of the population is fast asleep, is another big joke. Earlier I used to ridicule the 12 midnight to 6 am Night Usage timings set by the incumbent operators for some of then 3G/4G plans and was happy that atleast Tata Tele had set a more sensible timing of 11 pm to 7 am. But after looking at the timings set by Jio, even the incumbent operators start looking much much more lenient. Only a very very small percentage of Jio's subscriber base will be able to make good use of the Unlimited Night Usage feature. For all others, it's as good as non-existent feature.
Summary:
Reliance Jio is Open to all Indians from the 5th of September'2016. The Chairman has announced that All Usage of Jio network for all subscribers will be completely Free till 31st December'2016. This announcement will ensure that millions of Indians (especially the ones who already have a 4G handset) will try and grab a Jio Sim card at the earliest and hope for an early activation. The Chairman also said that the systems are being prepared to activate 1 million Sim cards per day. With a near about 118 days of Freebie period till the end of this calendar year, we could see anywhere between 20 million to 50 million Jio Sim cards being activated during this period. The 4G user experience, which was pretty good for most 'Test' users through June and July, was already seeing some bit of deterioration over the last couple of weeks, when Jio added atleast a couple of million 'Test' users to it's network. With the mad rush for Jio Sims expected to continue from next week under the 'Welcome' Offer, it will be interesting to see if Jio's network is able to handle the load and still offer a User experience which is atleast better than 3G network experience of rival operators.
During this 'Welcome' Offer period, we could see more follow-on announcement from Reliance Jio. I am hoping for some new Tariff Plans for people who are not interested much in Voice Calling, but only Data Usage, especially for people who consume over 10 GB of Data every month. Possibly specific Plans for JioFi devices. Unless something like this happens, I am expecting about 50% of Jio's users enrolled till 31st December'2016, to shun Jio and go back to their previous Sim cards from rival operators. I will certainly be one of them, unless Jio offers Data-specific plans with higher usage limits.
I think Reliance Jio will get very popular amongst Corporate Users, who are generally Post-paid ones. Reliance Jio's Postpaid plans are certainly offering lot more than that being offered by Airtel or Vodafone or Idea currently, especially on Plan 499 and above. These operators will immediately tweak their Post paid plans to try and retain their Corporate Customers, who offer substantial ARPUs on a consistent basis. Any loss of Corporate customer base to Reliance Jio, will mean a bigger impact on their profitability.
From the company's point of view, it is positive thing that the focus is clearly on earning decent amount of Revenues from every subscriber. Even under the cheapest plan of Rs.149 with 28 days validity (for prepaid), Reliance Jio will earn a minimum of about Rs.160-165 per month from every subscriber. Assuming about 50% of it's overall subscriber base to opt for a higher plan, Reliance Jio could be looking at a monthly ARPU of around Rs.400/-. Even if Reliance Jio manages to retain a paying subscriber base of about 25 million from 1st January'2017 onwards, it could result in monthly revenues of around Rs.1000 crores to start with. I am expecting Reliance Jio to incur a monthly Operating Cost of about Rs.1000 crores just to keep the 4G network Live across the country. In addition there will be cost for License Fees, Spectrum charges, Interconnect Cost, Staff Cost, Marketing Expenditure, etc., which together should amount to about Rs.700 to 1000 crores a month. That means Reliance Jio needs to achieve a monthly Revenues of about Rs.2000 crores just to cover all it's Expenditures (excluding Interest). Depending on how well it is able to ramp up it's paying subscriber base from January'17 onwards and react to competition's moves, it could take anywhere between 6 to 12 months for Reliance Jio to reach a monthly Revenues of Rs.2000+ crores.
Reliance Jio certainly cannot stop there as it has the Huge Debt burden to cater to as well. Thanks to a rich parent's backing, the Average Interest Rate for Debt raised by Reliance Jio is probably just about 7 to 8%. Still the Annual Interest Cost alone should be in the region of Rs.8000 to 10000 crores (including for Working Capital Loans), translating into an average monthly figure of about Rs.700 to 800 crores. That means Reliance Jio will need to take it's Monthly Revenues closer to Rs.3000 crores to achieve Cash Profit. I will be highly surprised if Reliance Jio achieves that target before the end of year 2018, especially with the current set of tariff plans announced. Reliance Jio will certainly have to make serious changes to it's tariff structure sometime around the end of year 2017 to keep the subscriber addition momentum going.
Thanks to the Freebie period under the Welcome Offer announced by Reliance Jio till 31st December'2016, I am expecting the entire Telecom industry to take a 3 to 5% hit in Gross Revenues in September'16 quarter and about 10-15% hit for December'16 quarter. The Oct-Dec'16 quarter will be quite a pain period for the entire Industry. But things should start looking better from the Jan-Mar'17 quarter and we can expect to see some good competition. The worst hit could obviously be the smaller operators & it will be interesting to see how long they survive and what steps they take. Despite the tariffs announced by Reliance Jio being disappointing for a small section of users, it will be positive for the overall Subscriber community, primarily via increased competition.
