Ripples Advisory, Reliance Jio’s 2021 vision is looking increasingly blurry, needs tweaks

The only way Reliance Jio can make a decent return on capital is if most competitors succumb and exit the telecom market


In March 2017, Reliance Jio Infocomm Ltd had said that India’s mobile market will be Rs3 trillion in size by 2020-21, adding it is well-positioned to achieve a market share of more than 50%.

But Jio’s own actions point to a singular focus on market share, with little regard for where the industry ends up in terms of revenues. “Reliance Jio’s tariff actions suggest it is happy to live with a 50% share of a market that has shrunk considerably, rather than a lower share in an unshrunk market,” said an analyst at a domestic institutional brokerage firm, requesting anonymity.

Industry revenues have shrunk almost every passing quarter since Jio launched operations. To add to the misery of incumbents, the company announced new post-paid tariff plans last week that are at about half the level of incumbents’ base plans in the category. It has also slashed international calling rates drastically, and both of these moves are likely to impact industry revenues by another 5% or so. The impact on profits will be far higher.

For perspective, industry revenues stood at Rs1.8 trillion before Jio’s launch, and analysts had initially estimated a drop to Rs1.6 trillion by fiscal year 2018 (bit.ly/2wN46FB). But revenues already fell to an annualized level of Rs1.31 trillion in the December quarter, even before Jio cut tariffs in the prepaid category in January this year. After the impact of the latest tariff cuts set in, revenues could fall below Rs1.2 trillion. And all of this is before Jio has crossed even the 25% hurdle in terms of market share.

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