Jio starts charging for calls and its punters aren’t happy about it

Disruptive Indian operator Reliance Jio has announced it will start charging its customers for calls to other networks due to a regulatory change.

Until now Jio had been swallowing the 6 paise (hundredths of a rupee) per minute interconnect usage charge (IUC) incurred when its users called someone on another network. This formed part of the super-aggressive pricing strategy designed to steal market share from the incumbents, which was an unqualified success.

The cunning plan seemed to be to follow the classic internet business model of focusing on building up a massive user base first, then working out how to get cash out of them later. But now Jio seems to be going back on that and is looking to recoup that IUC from its users, who aren’t too happy about the sudden moving of the billing goalposts.

Jio is insisting it’s just as much of a victim in this situation and is only introducing the charge because the Indian telecoms regulator – TRAI – is mucking it about over plans to scrap the IUC entirely next year. In the press release announcing the news charge Jio goes into great length about how often TRAI said the charge would be scrapped by the end of this year, but then claims it’s having a rethink – hence the new charges.

As well as blaming TRAI, and also to some extent the other operators, who it accuses of some kind of poor form too arcane to dwell on, Jio is also attempting to sugar the pill by throwing in some ‘free’ data in exchange for money spent. Free must have a different meaning over in India. Here’s the table it has sent its punters announcing the new state of affairs.

jio voice call charges

If Indian Twitter is anything to go by, this hasn’t gone down well among the millions of Indians who switched to Jio, seduced by all the actual free stuff, as opposed to free stuff you have to pay for. The hashtag #boycottjio is trending, with the tweet below a typical example of the kind of stuff it’s yielding.

We don’t know why TRAI is having another look at this IUC thing; maybe Jio has been naughty, maybe the other operators have lobbied against it, maybe TRAI just thinks Jio is getting a bit big for its boots and need knocking down a peg or two. Alternatively the TRIA decision could be nothing new and Jio is just using it as a smokescreen to start taking back some of its freebies. Regardless of the reasons this may represent Jio’s first major setback since taking the Indian telecoms world by storm. This video alone is unlikely to resolve it.

 

Reliance Jio becomes India’s number one mobile operator

Less than three years after launching Reliance Jio has overtaken Vodafone Idea and Bharti Airtel to become India’s biggest MNO by subscriber.

Jio announced it had hit 331 subscribers last week as part of its quarterly numbers announcement but, according to Ovum’s WCIS, that would still have left it just behind the recently combined Vodafone Idea group if the latter had even held onto its existing punters. Jio overtook long time Indian market leader Bharti Airtel in the first quarter of this year.

Vodafone Idea announced its own numbers late last week and they revealed that it continues to haemorrhage subscribers. “Our subscriber base declined to 320.0 million from 334.1 million in Q4FY19 primarily due to customer churn following the introduction of ‘service validity vouchers’ in the prior quarters,” opened the ‘operational highlights’ section of the report.

“We are delivering on our stated strategy although the benefits are not yet visible in our top line,” said Vodafone Idea CEO Balesh Sharma. “We remain focused on expanding our 4G coverage to over a billion Indians as well as expanding our data capacities by adding more sites on TDD and deploying Massive MIMO. We are well on track to deliver our synergy targets by Q1FY21. We expect these factors to increasingly contribute to our financial performance going forward.”

Returning to the WCIS numbers, the total number of mobile subscribers hasn’t increased that much in the three years that Jio has been operating, which means the third of a billion customers it now has have been largely taken from the incumbents. There has been a fair bit of consolidation, so it’s hard to make like-for-like comparisons, but it looks like Jio largely took subscribers from the smaller players initially, but in the past year has been hoovering up tens of millions of subscribers from its two big rivals.

Competition is obviously a good thing but if this trend continues Jio could become dangerously dominant in India and the country’s regulators and politicians may live to regret making it so easy for the country’s richest person to get off to such a flying start. The genie is out of the bottle now, though, and it’s hard to see how Vodafone Idea and Bharti Airtel are going to regain the initiative.

Jio surges forward with subs and profits

Reliance Jio has unveiled its latest quarterly figures and, surprise surprise, subs are once again on the up as well as profits.

Monthly ARPU might have be on the decline, down to $1.77, a trend which is not showing signs of slowing, but scale seems to be the answer for Jio. The firm now has a subscriber base of 331 million, adding 24.5 million over the last three months and 116 million during the last year.

“Growth in Jio mobility services has continued to surpass all expectations,” said Mukesh Ambani, MD of Reliance Industries, Jio’s parent company.

“In less than two years of commercial operations, Jio network carried almost 11 Exabytes of data traffic during the recently concluded fiscal quarter. Jio management is focused on giving unmatched digital experience at most affordable price to every citizen of the country, and accordingly expanding the network capacity and coverage to keep pace with demand.”

The progress which has been made by the firm over the course of the last two years is remarkable and perhaps demonstrates how under-developed the Indian market actually was. Although India has been seen as a growth economy, part of the now old-fashioned BRICs group, it wasn’t until Jio shook up the market the digital revolution took hold.

Average consumption of data is now up to 11.4 GB a month, with Jio suggesting customers used 10 exabytes over its network during the quarter. The Indian consumer certainly has an appetite for data and they don’t seem to be satisfied whatsoever.

Looking at the financials, these are also very promising. Early criticism of Jio was that it was negatively impacting competition in the market as there was little profit being made by the firm. This is generally seen as a negative, as running loss leaders to kill off competition very rarely works for the greater good in the long-term, though the numbers speak for themselves.

Quarterly revenues increased 44% year-on-year, while the firm collected profits of $119 million, a 45% year-on-year boost. These numbers are attractive for the moment, but profitability currently looks to be reliant on scale and subscriber growth. Sooner or later, this growth will slow, and the team will have to look at the worrying rate at which ARPU is declining.

Period Q1 2019 Q3 2018 Q1 2018
ARPU (Indian Rupee) 122 130 154

Vodafone Idea has had enough of toe-to-toe Jio battle

Vodafone Idea has contacted subscribers to confirm the end of its ultra-low-priced data tariff as it shifts towards ARPU over scale.

According to The Economic Times, Vodafone Idea is following in the footsteps of Bharti Airtel to end its lower cost data tariffs. These might be attractive to Indian consumers and do encourage the overall subscription numbers, but the dent which has been put in ARPU figures seems to be too much to stomach anymore.

The SMS states:

“Dear Customer, your current Idea post-paid plan is no longer valid from 10-July-2019.You will be upgraded to Nirvana 399 with benefits of unlimited voice calls, 40 GB high speed data and 100 L/N SMS.”

Although the telco is asking subscribers to effectively double their monthly bill, the new data plan does also include year-long subscriptions to Amazon Prime, Prime Video and Prime Music, as well as other bundled TV services.

For Vodafone Idea, this is perhaps a move which has been on the horizon for some time.

When Jio entered the market, it offered a service which drastically undercut anything from the incumbent players. This loss-leader position threw the market into chaos, with profits being slashed everywhere and telcos disappearing from the landscape. The remaining players had to create tariffs which were competitive, such was the queue of consumers waiting to switch to Jio, but they would also have to stomach significant blows on the financial spreadsheets.

What this move does suggest is that Vodafone Idea is willing to sacrifice subscriber scale, focusing on higher-value services and customers. It will see market share drop, but if there are greater profits on the horizon, investors might be happy with the outcome.

Jio is unlikely to follow suit, why would it if it is profitable at the same time as cheap, but this doesn’t mean Vodafone Idea is in trouble; there will be a market for higher value services in India and this is just a different way of doing business.

What this does suggest is that Vodafone Idea cannot tolerate the toe-to-toe battle with Jio. It seems it cannot be beaten at its own game, so perhaps it is a better idea for Vodafone Idea to carve its own niche in the Indian telco environment.

Vodafone CEO bemoans Jio effect on India

The Indian consumer might be surging into the digital economy at an unprecedented speed, but the telcos are certainly not reaping the rewards according to Vodafone CEO Nick Read.

Speaking at Mobile World Congress in Barcelona, Read pointed towards consumers which are consuming more data every single day (12 GB a month on average), as well as unsustainable business models and regulations which favour no-one except the disruptive influence of Jio. It isn’t necessarily a picture which creates an encouraging view of the market.

“We only ask for a level playing field,” said Read, bemoaning regulatory and competition rulings made in the country.

It seems Reid believes there has been an institutional preference towards the newest entrant into the Indian telco regime. This is also a company which is forcing the market to create artificially low tariffs, an unsustainable position for the market to maintain. What impact this has on the long-term prospects of India’s digital dream remain to be seen.

While it is hardly unusual for the CEO of a losing telco to moan about unfair market conditions, there have been some credible points made. Jio did certainly disrupt the market, helping the country move into the digital era, but there was certainly consequence. The aggressively low tariffs saw numerous telcos exit the space, either closing-down operations, merging with a rival or declaring bankruptcy.

Vodafone was one of those victims, currently in the process of merging its operations with long-term rival Idea Cellular. Reid highlighted he has been over to India to review the plans recently, and the team has managed to reduce the integration process from four years to two, but it is still losing money. That said, it is not alone.

The issue which remains here is what happens if this trend of Jio destruction is allowed to continue. How many more telcos will disappear from the landscape (there are only effectively four left, including government owned BSNL) before the government steps in to do something. The current position is not exactly ideal.

As it stands, India currently have four major telcos to provide connectivity services for roughly 1.3 billion people. Europe has roughly 160 telcos for a population of 500 million. Although many would argue there needs to be consolidation in the European space, the shortage of options in India is not exactly ideal. The risk of regionalised monopolies is certainly present.

Of course, the newly merged Vodafone Idea business is not lying down while Jio runs riot throughout India, Reid highlighted a Rights Issue is currently underway with the business hoping to raise $3.5 billion. Not only will this help the businesses merge and update infrastructure, it would be fair to assume some pretty aggressive counter-strikes against Jio.

India is one of the most interesting markets worldwide right now, but there is certainly a risk of the landscape devolving into chaos. Whether the Indian government is sympathetic to Reid’s plight remains to be seen, though current trends should not be allowed to continue.

SingTel saw Q4 profit drop by 14%

SingTel reported almost flat revenues and 14% decline in net profit in the quarter ending 31 December 2018, blaming negative influence from its investments in Australia and India.

In its quarterly results announcement, SingTel reported a 1% year-on-year growth in revenues to S$ 4.626 billion (1 Singapore $ = 0.74 US$), or 4% in constant currency, but 11% decline in EBITDA, and 14% decline in net profit. The first nine months of FY2019 saw revenues almost unchanged (up by 0.2%) of the same period the previous year, EBITDA down by 8%, and net profit down by 51%. The total free cash flow is still solid at S$2.5 billion although it went down by 10% from a year ago.

“We have stayed the course despite heightened competition and challenging market and economic conditions. We’ve continued to add postpaid mobile customers across our core business in both Singapore and Australia while making positive strides in the ICT and digital space,” said Chua Sock Koong, Singtel Group CEO. “We remain focused on investing in networks and building our digital capabilities – areas that are important to our customers and our future success. We will also step up on managing costs, growing revenues and driving efficiencies through increased digitalisation efforts.”

The key factor that impacted the results was the return on its investment in regional associates. The total profit before tax (PBT) in its regional associate portfolio went down by 35% to S$342 million. The worst hit was Airtel, which suffered a S$167 million decline in PBT and registered a pre-tax loss of S$129 million. When broken down to different markets, Airtel fared better in Africa but came under “continued pricing pressures” (from Jio)

In Australia, SingTel’s subsidiary Optus has delivered a healthy growth of 16% in total revenues  to A$1.64 billion (1 Australian $ = 0.71 US$). The mobile operator also switched on Australis’s first commercial 5G network in January. The slower than expected migration to NBN by broadband users, however, has brought in a 9% decline in mass market fixed revenue.

Despite lowering its outlook for the full financial year (ending 31 March) from stable EBITDA to single digital decline, SingTel was still confident in its long-term prospective. “Our long-term view on our regional associates remains positive as they continue to ride the growth in data and execute well against the challenges and competition,” added Chua, the CEO. “We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth. Meanwhile, we are working closely with them to build a regional ecosystem of digital services that leverages the Group’s strengths and unlocks the value of our joint mobile customer base of over 675 million.”

 SingTel 3QFY2019 results

Jio claims another scalp as RCom is down and out

Reliance Communications has arguably gotten the sharpest end of the Jio stick over the last couple of years, but it seems the misery is finally over as the firm files for bankruptcy.

According to The Times of India, Chairman Anil Ambani has approached the National Company Law Tribunal to file for bankruptcy after a torrid couple of months which capped off a horrendous a couple of years. Although the team thought there might be some salvageable assets in a deal with Reliance Jio, this might prove to be the final chapter of the telco story for Anil.

Over the last couple of months, RCom has been attempting to navigate the red-tape maze to sell spectrum assets to Reliance Jio, though this transaction has been blocked due to no-one tackling responsibilities for debts owed to the Department of Telecommunications. The DoT was not willing to greenlight the deal until it had reassurances, though with RCom not able to pay and Jio not willing to, the deal entered a stalemate.

Of course, the plot thickens when you consider this cash was supposed to help RCom pay off various other debts, including one to Ericsson, which had been attempting to get Ambani arrested and imprisoned over the monies owed. It has all seemingly fizzled out into somewhat of a depressing end for RCom.

15 years ago, however, this would have been far from imaginable. The firm used to be one of the more promising telcos in a relatively lifeless market. India has long been one of the ‘BRIC’ nations, with potential fortunes enough to convince many to make a bet on the market. However, incumbent players were happy with the status quo and India fell behind the rest of the world in the digital rankings. That was until Anil’s brother Mukesh turned up with his new business Reliance Jio.

Reliance Jio changed the rules of the game and offered a disruptive data-driven service which appealed to the Indian consumer. Soon enough millions of Indians were ditching traditional telcos in pursuit of the glories hidden in digital society. RCom did not adapt and is now suffering the consequences of standing still for a decade.

RCom now joins a growing list of casualties in India. With the Vodafone/Idea merged business planning its assault, you have to hope this ‘new’ player will be able to offer some resistance to the Reliance Jio momentum. Although this is an admirable success story, there are a worryingly small number of telcos for such a vast market.

Jio bags another 10 million – how was your October?

The Telecom Regulatory Authority of India (TRAI) has released the subscription data for October and it’s another familiar story as Reliance Jio grows its subscription base again.

Looking at the market on the whole, India now has 1.17 billion wireless subscriptions, having added another 720,000 during October. Amazingly, market penetration is now up to 87%. While growth has been staggering since Reliance Jio shunted the status quo, if the country follows what would be considered the traditional trend (mobile penetration eventually exceeding 100% of population) there are still a couple of hundred million mobile subscription to realise.

Unsurprisingly, Reliance Jio has greedily devoured almost all of the positive growth.

Subscription growth Market share
Reliance Jio 10,500,227 22.46%
BSNL 386,926 9.7%
Reliance (3,831) 0.002%
MTNL (8,068) 0.3%
Tata (925,299) 1.8%
Bharti Airtel (1,864,065) 29.2%
Vodafone Idea (7,361,165) 36.55%

With only BSNL, India’s state-owned telco, heading upwards Reliance Jio has firmly placed itself in the strongest position across the market. Bharti Airtel is in somewhat of a downward spiral and it’s difficult to see how it will get itself out of this position, therefore eyes will be cast towards Vodafone Idea for resistance to the Reliance Jio tsunami which is sweeping India.

Looking at these figures alone paints a relatively dreary picture, though you have to appreciate the complicated process the business is currently undertaking. The merger between Vodafone and Idea, which was caused by the jittery upstart Jio, is going through the rationalisation period right now. This is a very complex time and will define the firm’s ability to tackle the Reliance Jio headache in the months to come.

On the money side, we do not foresee this being a massive issue. Vodafone and Idea are merging two massive networks and will soon enough realise the benefits of scale. The subscriber base is massive, providing security for any future investments, and the sale of various different assets (such as the respective tower businesses) provides a hefty war-chest. Taking these factors into account, money should not be an issue, so we have to wonder whether the right people will be put into the right roles and if the right (and flexible enough) strategy will be put in place.

Vodafone Idea is now clearly the market leader in India, but it will only take a couple more months of Reliance Jio continuing on its current path for this lead to be eroded. The momentum is gathering behind Reliance Jio and new products and services (such as fixed broadband) will only add more as convergence ambitions are realised; the emphasis is certainly on Vodafone Idea to prove this isn’t turning into a one-man market.

TRAI reveals Jio is the only Indian telco in growth

The Telecom Regulatory Authority of India (TRAI) has released its monthly report on the state of play in India, and it’s a pretty gloomy picture for everyone aside from Jio.

Across the country, the message is relatively positive. Wireless subscriptions have grown once again this time by 2.4 million, not as glorious as previous months but growth is still growth, but to add a slight dampener to proceedings, broadband declined, this time by 70,000 subscriptions. Once again we reiterate the fixed broadband segment is one which is bursting with opportunity.

Sustained growth in India, while commendable, is not necessarily an interesting development as we have been saying the same thing for more than 18 months. Perhaps the most interesting aspect is who is capturing the additional subscriptions. Stating Jio has collected the lions share will surprise no-one, but September saw everyone else shrink.

Subscription growth Total market share
Reliance Jio 13.02 million 21.57%
MTNL -9,435 0.3%
Reliance -16,349 0.004%
BSNL -536,407 9.67%
Tata -1.01 million 1.88%
Bharti Airtel -2.36 million 29.38%
Vodafone -2.62 million 18.97%
Idea -4.06 million 18.23%

Reliance Jio has now firmly established itself in second place in the market share rankings, which has been a long-time coming, though it is starting to make genuine in-roads against Bharti Airtel. Each month new figures are released and while Bharti might have been able to maintain its position, recent figures have shown the eroding impact of Jio.

The issue for those who are trying to resist the Jio revolution is what is around the corner. Jio has made no secret of its plan to capitalise on the ridiculously low broadband penetration across the country, and you have to wonder what will happen when a more established network can be developed. The company recently purchased controlling stakes in Den Networks and Hathway Cable, offering it a foot through the door, though expect some big developments over the coming months.

Predicting what will happen is a simple task; Jio will take the same low-cost approach to broadband as it has with mobile, though the potential of a convergence product portfolio could further pile the misery onto competitors. How many customers might be tempted to switch over to Jio’s mobile proposition when a cheap broadband bundle is thrown in as well? This is what will be the most interesting development.

Jio has done an absolutely wonderful job of revolutionising the Indian digital economy, but what can be done on the fixed broadband side of things remains to be seen. Just as the story is starting to become repetitive, Jio is about to start on a new chapter.

We’ll be ready for 5G by 2020 – Reliance Jio

Reliance Jio owner Mukesh Ambani has stated India will be fully-4G by 2020, and is setting his eyes on the 5G euphoria already.

The statement of intent adds to a remarkable couple of years for Reliance Jio and the Indian digital economy on the whole. Starting from nothing in December 2015, Reliance Jio has risen to become arguably the most influential telco in India, dragging the country’s digital economy into the 21st century. A little over two years ago, India was in the digital baron lands, though now the Indian digital appetites are as insatiable as those in ‘developed’ nations.

“India has moved from 155th rank in mobile broadband penetration to being the number 1 nation in mobile data consumption in the world… in less than two years,” said Ambani at the India Mobile Congress, courtesy of Live Mint. “This is the fastest transition anywhere in the world from 2G/3G to 4G. By 2020, I believe that India will be a fully-4G country and ready for 5G ahead of others.”

Paying complements to the pro-active approach to stimulating the digital economy from the Indian government, Ambani is continuing the ambitious expansion of the Reliance Jio business. 5G is what will attract the headlines, most notably after a few telcos highlighted 5G is not a top priority for some nations at Broadband World Forum last week, but the broadband ambitions are just as important.

Tackling the 5G euphoria and increasing broadband penetration across the country perhaps work happily alongside each other when you consider the importance of a fibre network in both cases. The JioGigaFiber proposition, announced during the company’s AGM in July, promises FTTH connectivity in a market where broadband penetration is roughly 10%. ‘Fibering up’ the country is critical for 5G, and Reliance Jio has already started the mission.

“India will be among the largest digital markets in the world,” said Ambani. “Every enterprise must have an ‘India First’ vision to participate in this market. We will need to reinvent to grow and nurture this market to its full potential. This will be a win-win for the entire industry, for India and for the entire world.”

One interesting question which remains is whether the lessons taken from the Jio-effect can be implemented into other nations which are struggling in the lowly places of the digital league tables.