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Reliance Jio Prime Subscription May Retain Users, but Wrong Strategy to Follow: Analysts

Reliance Jio Prime Subscription May Retain Users, but Wrong Strategy to Follow: Analysts

By Ravi Sharma | Updated: 24 February 2017 13:02 IST

Highlights

Jio Prime subscription provides free data at Rs. 10 per day
Jio users continue to suffer from frequent call drops
Analysts say the telco with most reliable network will succeed

Come April 1, Reliance Jio’s 100 million users will finally have to start paying for its unlimited data and other services that they have been enjoying for free since September 2016. However, the fast-growing telecom operator is only levying nominal charges for its customers, as Mukesh Ambani announced the new Jio Prime subscription plan that offers all the benefits under the Jio Happy New Year Offer at Rs. 10 per day.

Rival telecom operators are said to have breathed a sigh of relief with the Jio Prime announcement, with Cellular Operators Association of India (COAI) Director General Rajan S Mathews saying that Reliance Jio’s plans are “aggressive but not bad.”

However, analysts feel that Jio’s new subscription plan is not the right strategy to follow, even though it will help the company retain customers. There had been concerns in the market that Reliance Jio users will abandon the network once the free services expire on March 31.

Gartner Research Director Amresh Nandan told Gadgets 360, “Jio Prime membership programme appears to be a way to retain the subscribers post commercial launch. In some sense, it is an acute strategy considering Jio’s network has been on for a while and the gear should have shifted to quality of experience, variety of services and value beyond standard data connectivity. This will hopefully help Jio prevent the expected churn (post commercial launch) to some extent.”

Reliance Jio’s fast growth can easily be attributed to the free 4G data it has provided customers since launch. With the free services set to end, users may eventually abandon the network especially considering the patchy voice calls. Network issues plague Reliance Jio users close to six months after the commercial launch, who make the most calls in a day among all operators in India, with the call duration being the shortest, as per a TrueCaller report.

Jio blames rivals for the network interruptions however, primarily blaming Airtel of not providing sufficient interconnect points to route calls from Jio network to other operators’. Airtel, on the other hand, says that it has provided enough interconnect points, and that Reliance Jio has not been able to utilise them. Jio’s 4G download speed has also tanked in January after hitting a high in December, according to TRAI data.

Nandan cautions against Jio’s strategy of providing low-cost data via plans such as Jio Prime, saying “It is not practical to continue with this approach for long. It will hurt the entire industry and delay the much needed transformation across telcos.”

Faced with customers signing up for Jio’s free data in drives, rival telecom operators such as Airtel, Vodafone and Idea have started offering unlimited calling and bundled data plans that are quite competitive, though still not free.

Parv Sharma, Research Associate, Counterpoint Research, told Gadgets 360, “They [Reliance Jio] do not want their existing subscribers to port to other operators as competitors have already started offering data plans that are at par with Jio and have a better network penetration throughout India with fallback support for 3G and 2G."

To counter the new, competitive data plans by rival operators, Ambani announced that Reliance Jio will monitor the plans across telcos, and provide users 20 percent more data than the best-selling plans at the same price. This, Ambani says, will help Jio maintain its position as the most value-for-money operator in India. It can also be seen as a way to retain users on the network while the kinks are ironed out, especially until the network issues are sorted out.

Counterpoint’s Sharma says, “Jio raised the bar by giving 20 percent more data by matching the plans of other operators. So this will make the market more competitive. End users will gain from this, but the operators which are already struggling with debts will have a tough time ahead. An operator with a reliable network and value for money plan will succeed in the long run.”

Jio has 100 million users on its network, but Airtel is much ahead of it with 265.85 million subscribers. Vodafone and Idea have 204.69 million and 190.52 million customers, respectively. To further grow its network, Jio would have to improve its voice call service substantially and regain its lead in the 4G data segment. There have been no signs so far of users completely abandoning their telecom operator for the market disruptor, even though Ambani claimed that lakhs have made it their primary number via Mobile Number Portability.

Gartner’s Nandan says Jio should also start looking at areas other than consumers, such as the enterprise market, for further growth, saying, “Let’s see how the enterprise market strategy of Jio evolves. That’s an area of differentiation from medium- to long-term perspective for telcos. Interested stakeholders should analyse that more than the consumer market strategy.”

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