Reliance Industries Chairman Mukesh Ambani has today revealed details of Reliance Jio’s launch on the occasion of the company’s 42nd AGM. Reliance is planning a very aggressive launch of the Jio by resorting to heavy price cutting. The company has already incurred a relatively high sum of 1,34,000cr towards capex for the venture and the spending is expected to increase further. Such capex spending is huge compared to what has been incurred by other telecom operators such as Bharti Airtel and Idea Cellular. Reliance’s strategy is to grab significant market share from competition, which should resultantly lead to other telecom operators getting compelled to lower prices to defend their customer base and overall market share.
Further our preliminary analysis suggests that subscribing to Reliance Jio’s plans would result in 2x-4x savings for consumers. If the aggressively priced offerings of Reliance Jio find favour among customers then the company would be able to notch up significant market share from competitors. To add to the goodies, the company is offering unlimited voice calling and data download to customers free of cost from 5th September 2016 to 31 December 2016. In our view, this is an attractive offering and might entice customers of competing telecom players to switch to Reliance Jio. The competition is likely to face intense pressure on their bottom-lines in the quarters to come, given the value proposition in the offerings of Reliance Jio.
During 1QFY2017, telecom companies were able to deliver double digit top-line growth although their performance faltered on the bottom-line front. Gauging increased competition with Reliance Jio’s advent, we prefer to be cautious on the sector.
Key takeaways from AGM:
Here is a snapshot of Reliance Jio’s Tariff: