Reliance Jio's Big Plan: Capture More Than Half Of The Market

Reliance Jio's Big Plan: Capture More Than Half Of The Market

Reliance Jio expects the Indian telecom market to expand from Rs. 2 lakh crore to Rs. 3 lakh crore by 2020-2021, of which data would constitute a major portion.

Since its entry in September, Reliance Jio has taken the market by storm through its aggressive offerings. The intense competition could lead to consolidation in the sector, say analysts. Though Reliance Jio will start to charge customers from April 1, it has announced a slew of aggressive prepaid and postpaid plans. Jio held a meet with analysts to share its future plans and outlook for the sector. In a presentation to analysts, Reliance Jio said it is "well positioned to achieve more than 50 per cent revenue market share. Jio anticipates EBITDA or operating margin of more than 50 per cent, it added. Brokerage firm Religare has come out with a note on key takeaways from Jio's analyst presentation. Here are the highlights from Religare's note.

Data capacity: Jio believes data capacity would be the key driver for revenue market share, and that the company is targeting 50 per cent revenue market share with EBITDA margins (operating margins) in excess of 50 per cent. About 60 per cent of Jio's sites have fiberised backhaul portions, giving it a 3-4 year head start over competition.

Market size: Reliance Jio expects the Indian telecom market to expand from Rs. 2 lakh crore to Rs. 3 lakh crore by 2020-2021, of which data would constitute a major portion. Jio currently carries 1 billion GB/month of data traffic, and believes the Indian market has the potential to carry 5-6 billion GB/month of data traffic over the next 4-5 years.

Digital services line-up: Jio showcased an impressive line-up of current digital services (online TV, cinema, music and payments) and a few upcoming ones such as the 'connected car'. Based on the company's research, 400 million subscribers have the potential to spend Rs. 500 on digital services.

Handset prices: Jio believes handset prices are a good proxy to potential ARPUs (average revenue per user). The company indicated that the average handset price on its network is more than Rs. 10,000 and it enjoys a 40 per cent market share in handsets priced above Rs. 20,000.

ARPU (average revenue per user) focus: Jio sees significant elasticity in data (greater than voice) due to limited supply. The company intends to offer high-speed data access to customers while keeping overall pricing ARPU-oriented. RJio pointed that the current smartphone ARPUs (adjusted) for the industry hover around Rs. 329.

Religare View: Religare analysts Rumit Dugar and Saumya Shrivastava believe the market could remain competitive for an extended period considering Jio's aggressive revenue market share expectations. "While telecom stocks have seen a sharp rally owing to potential consolidation in the sector, we think that price competition would remain intense and earnings recovery would hinge on data-led recovery in industry growth," they said.