02 Dec 2018 17:15 IST

Reliance Jio continues to dominate the telecom sector

It is well-placed to play the tariff game and take on competition, especially with its deep pockets

Reliance Jio’s relentless march to capture subscriber and revenue market shares continues, as the company continues to grab increasing portions of the pie from its main competitors — Bharti Airtel and Vodafone-Idea. Data released by the Telecom Regulatory Authority of India (TRAI) for the September quarter suggests that Reliance Jio has a more productive subscriber base compared to its peers.

On their part, Airtel and Vodafone-Idea are not sitting tight, and have initiated steps to increase their average revenue per user (ARPU) by increasing the minimum recharge tariffs for subscribers. But these moves are unlikely to halt Reliance Jio’s smooth run.

Grabbing more pie

The revenue market share is calculated based on the consolidated adjusted gross revenue (AGR) figures reported by these companies to the telecom regulator. AGR figures are used to calculate of the share of revenues payable to the government by the mobile operators.

According to data from TRAI for the July-September 2018 period, Reliance Jio had a revenue market share of 25.8 per cent, which is more than double of what it was in the same period a year ago — 11.6 per cent. On a q-o-q basis, too, Reliance Jio has expanded its market share.

In contrast, Vodafone-Idea’s revenue market share decreased steeply to 32.4 per cent in the September quarter, from 36.2 per cent it recorded in the second quarter of last year. Bharti Airtel managed a share of 30.6 per cent, down from 31.7 per cent in the June quarter.

The more worrying aspect is that at the industry level — the AGR has fallen by 14.7 per cent y-o-y in the September quarter. Stiffer competition for subscribers among operators after Reliance Jio’s entry and the down-trading in tariff packages by customers have meant that the industry size as a whole has shrunk. Down-trading is when customers opt for lower-value packages that offer a better combination of voice and data as operators reduce rates to attract more subscribers.

Subscriber market share

The subscriber market share figures also provide interesting insights. Now, Vodafone-Idea has a subscriber market share of around 37.2 per cent, but a revenue market share of 32.4 per cent as indicated earlier. These figures show that a large subscription share doesn’t necessarily translate into higher revenues for a company.

The story is slightly better for Airtel, with a 29.4 per cent subscriber share. But Reliance Jio steals the thunder, with a subscriber market share of 21.6 per cent, as compared to the 25.8 per cent revenue market share. With its focus on getting more 4G customers and increasing data penetration, the company has been disproportionately rewarded by a highly productive customer base.

Increasing tariffs

As the incumbent operators struggle with declining ARPUs, they have come up with new tariffs and packages to stem the bleed. Airtel and Vodafone-Idea have come up with plans that suggest the minimum recharge packs are priced at ₹35. Some reports indicate that these companies may deactivate the SIM cards of subscribers who fail to recharge for a minimum amount. As many customers tend to use a second SIM with very low tariffs just to receive calls, the likes of Airtel and Vodafone-Jio are reportedly finding it unviable to service them.

Analysts and industry experts, however, feel that this move to increase the minimum recharge size will push subscribers towards Reliance Jio. Additionally, many customers may also port out of their existing operators and make Reliance Jio their main provider.

Given that Reliance Jio has been a 4G player from day one and has had all or most of its subscribers availing data services early on, it is well-placed to play the tariff game and take on competition, especially with its deep pockets. One aspect on which incumbent operators can take heart it that in metros, Reliance Jio has lost revenue market share. In large and lucrative A category circles, the incumbents continue to put up a good fight.

But in the B and C category circles, comprising mostly rural and relatively less prosperous states, Reliance Jio has made serious inroads and is rapidly gaining subscriber and revenue market shares.

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