Reliance Jio to be top telco by 2021: Bernstein

Reliance Jio, the new telecom player, may capture the top position by 2021 on a revenue basis, according to a report by Bernstein.

"Given the current rate of ongoing customer acquisition, Jio could reach the leading position on a revenue basis by 2021 and on a subscriber basis by 2022," Bernstein analysts Chris Lane and Samuel Chen said in the report on Monday.

No start-up operator has managed such a feat anywhere and certainly not in a market where penetration levels among the 'middle classes' were already high, it said, adding Bharti Airtel had survived extreme Darwinian competition to emerge as a competitive market leader, while Vodafone has the backing of a global giant.

Bernstein expects Jio to reach 28% revenue market share and 26% subscriber share by the end of this financial year (March 2019) as it did not see both Bharti and Vodafone responding directly. "Neither Bharti nor Vodafone Idea have the stomach to engage in a pointless subsidy war. Instead we believe they have accepted their fate, and are looking forward to a time when Jio, having achieved a leading position, starts to monetise their base through higher pricing," the report said.

Average revenue per user for both Bharti and Vodafone this year as they cancel lower value SIMs, but don't expect 3G/4G pricing to start to creep up until 2020.

Jio has consistently been adding 6 to 10 million new active customers per month (as measured by the VLR). ...most of these additions are due to customers taking a highly subsidised JioPhone. These customers are mainly located in rural areas.

Both Bharti and Vodafone management have indicated they do not believe in handset subsidies for pre-paid users.

Affordable data tariffs ushered in by new telecom player Reliance Jio in late 2016 led to this massive data boom which Indians have latched onto. As per a report by Ericsson released last week, smartphone subscriptions in India is likely to grow from 560 million in 2018 to 1 billion in 2024 and data traffic per smartphone per month is expected to grow at compound annual growth rate of 14% from 6.8 GB in 2018 to 15 GB in 2024.

Though, data usage has been on an upswing but the margins or Arpu (average revenue per user) is on a constant decline. The number of internet users has been growing at a fast pace, as access to data services and 4G enabled handsets became affordable with the entry of Reliance Jio.

India has over 1 billion mobile users, but only 50-60 % of users are still on the 2G network, that is, not on internet. The battle for next round will be fought for these 2G users where every telecom player will compete to get maximum pie of this number.

TOWERING AHEAD

• 28% revenue share Jio may reach by march 2019
   
• 26% – subscriber share it may notch this fiscal
   
• 6-10 million – Subscribers Jio is adding every month