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Reliance Jio eyes 500 million subscribers by mid-2020

Shubhra Tandon
Reliance Jio accounts for 65% of 4G subscriber base, with JioPhone accounting for 12% of this base.

Reliance Jio aims to reach its targeted 500 million subscriber mark in less than 12 months against its earlier target of financial year 2022.

After capturing a lion's share of the 4G market, Jio is now looking at capturing more than half of the country's telecom subscriber base that is steadily migrating to data from pure voice services, FE has learnt from reliable sources. Currently, data subscriber base - both 3G and 4G - in India stands at 586 million. Reliance Jio accounts for 65% of 4G subscriber base, with JioPhone accounting for 12% of this base. An email sent to Reliance Jio remained unanswered.

Given that the current penetration of broadband data service stands at 50%, there are 35 crore (350m) pure voice subscribers in India on the networks of incumbents. Jio is eyeing this segment as the regulator has floated a consultation paper on extending the regime under which telecom operators continue to pay interconnect usage charges (IUC) to other operators for offnet calls. Jio being the new entrant has been paying IUC to incumbent telcos but had not budgeted to pay for it from January 2020. However, with the regulator taking a relook at this deadline, it makes sense for Jio to become the dominant player.

Thanks to the minimum recharge scheme of the incumbent operators, the cost for outgoing calls has gone up for voice-only subscribers. In a bid to capture a large number of these subscribers, Jio has slashed the prices of its 4G bundled JioPhone by more than half to Rs 699 from Rs 1,500 without the need to exchange an old handset phone. This move is expected to give a further boost to its subscriber acquisition plans, which currently is roughly 8 million per month.

The offer, though time bound at present, which is for the festive season, industry experts say Jio could extend this beyond October. The recent stepdown in Jio's monthly subscriber additions from an average of 10 million in FY19 to 8 million during the first four months of current financial year could also drive Jio to extend this offer, experts claim.

"After two years of launch, JioPhones have gained mere circa 15% share of the circa 500 million feature phone base. The extension of this offer will help boost its share in the future," says CLSA.

The extension of the offer on JioPhone will also assume significance at a time when Trai (Telecom Regulatory Authority of India) has come out with a consultation paper on whether the January 2020 timeline to move to zero IUC (interconnect usage charges) should be changed.

Any extension of IUC charges will hurt Jio, which is a net payer of these. Jio currently is the net payer of IUC charges. It had a net access charge (consisting of IUC charge) of Rs 900 crore in the first quarter ended March 31, 2020, analysts at Axis Capital said. According to analysts, extension of IUC deadline will be negative for Jio as it pays about 18% of its EBITDA as IUC charges.

By becoming a dominant player by subscriber numbers, Jio will be able to mitigate this cost. The current offer, highlights the subscriber addition focus for Jio, analysts at Jeffries observed. "The total JioPhone base now is circa 70 m (million), still below its target of 100 m (million). We view this offer as a move to achieve the same. It is also likely to shift low-end voice-only subscriber to Jio, in a possible bid to lower high off-net calls," analysts said.