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JioFiber unlikely to disrupt India broadband market, say analysts

MSN 2019-09-11 00:46:00

JioFiber pricing is unlikely to disrupt the market like the way Reliance Jio Infocomm did with its wireless offerings, according to analysts.

The plans are unlikely to drive a significant churn in the market, said a note by CRISIL Research. "The lack of pricing aggression and non-attractive bundled pricing would result in limited disruption in the underpenetrated wired broadband market. Further, higher non-refundable deposit fee of Rs 2,500 and additional cost for premium content would also dampen prospects," said the ratings firm.

According to the current offering, Jio's pricing works out to be about Rs 4 per GB for the base plan, while the rivals are also in a similar range. Government owned BSNL's is much lower at Rs 2. Among premium plans, JioFiber's price per GB is approximately Rs 1.2-1.6, again in line with competitors. CRISIL observed that the pricing for mid-size packs continues to remain higher than current wireless pricing on a per GB basis, which gives "comfort that pricing in the wireless market would stabilise".

Three years after launching its mobile services, which disrupted the entire telecom industry with its below-cost tariffs, Jio last week launched its fibre-to-home (FTTH), wired broadband services across 1,600 cities in the country. Jio's monthly tariffs start from Rs 699 and goes up to Rs 8,499 with speed limits ranging between 100 mbps and 1 gbps. As it stands, the wired broadband market is not big enough as it has a total base of just 18.45 million, of which the largest share is of BSNL at 9.09 million followed by Bharti Airtel which has 2.39 million subscribers. The other players are very small. "With a mere seven connections per hundred households, India's wired broadband market is highly under penetrated," the ratings firm said.

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According to industry experts, Bharti's tariffs start from Rs 799 per month and goes up to Rs 1,999 with speed limits ranging between 40 mbps to 300 mbps. While Jio is offering a range of other attraction like entertainment even Bharti has recently upped its package with the launch of a platform called Airtel Xstream, which is a unified entertainment services platform.

According to brokerage BNP Paribas, Airte'ls Xstream platform can effectively counter Jio's offerings. "We believe Airtel's current converged digital entertainment platform, Xstream is competitive on the pricing and product fronts and to a large extent tackles competition from JioFiber," BNP Paribas said. Further, the edge Bharti currently has is that it is providing free subscription of popular OTT players like Amazon Prime and Netflix whereas Jio does not have these at present.

Analysts say Jio's pricing and content strategy do not reveal any aggressive efforts to expand the market. "Jio is playing on high speed (minimum 100 mbps) as competitors will not be able to offer the same beyond key large towns due to a lack of intra-city fiber network, a key differentiating factor that Jio will have to deliver high speed consistently," analysts at Emkay observed.

Meanwhile, strategy of partnering with local cable operators (LCOs) may be crucial for rollout on an accelerated basis. RIL's strategy of partnering with about one lakh LCOs may help in accelerating the rollout of last-mile-connectivity to households (and commercial establishments), which is crucial for the success of broadband segment, analysts at Kotak Institutional Equities observed.

After Jio increased its digital offerings, integration of television and digital is gaining ground in India. FE reported on August 29 that Hinduja Ventures recently announced re-organisation in Hinduja Group's media and communication business. This is set to aid the group in expanding its digital offerings in the rural market, along with the ability to enhance the reach of the group's entire product portfolio from trucks-to-financial services to smaller towns and cities, utilising its wide cable operators network by making them direct selling agents for the group.