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Last word on telecom pricing war yet to be heard: JP Morgan
Even as the last word on the pricing war in India`s telecom space is yet to be heard, JP Morgan in an analysis says the 4G offering by the latest player Reliance Jio is gaining traction and will see its subscriber base double by the end of this financial year.
Mumbai: Even as the last word on the pricing war in India`s telecom space is yet to be heard, JP Morgan in an analysis says the 4G offering by the latest player Reliance Jio is gaining traction and will see its subscriber base double by the end of this financial year.
"Over the last few months, as Jio`s free offering has gathered subscribers, and more importantly, impacted data consumption on existing telcos` networks. There has been a pricing reaction from t he incumbents for their existing telecom offering especially on data," the investment banker`s latest report said.
"The company`s (Jio`s) free scheme launched in September 2016 has been extended to March 2017. Jio has gathered around 52 million subscribers as of December-end, and the expectation is to hit 100 million subscribers by March 2017, after which the company would start billing commercially," it said.
Speaking about tariffs, the report said while Jio has released a tariff plan -- given that subscribers are not being charged for it -- there are some concerns on whether the tariff plans would be adjusted lower when the actual commercial operations are launched in April 2017. JP Morgan said Jio should seek to maximize average revenue per user, than pricing go for a per-GB data offer.
"To that extent, the initial price scheme launched by Jio was a positive one as the effective pack started at Rs 499 per month, although there is a lower priced plan of Rs 149 per month."
"However, given the way incumbents have cut tariff plans, it remains to be seen how Jio reacts from April, when commercial operations are launched and whether we see tweaks in the currently announced pricing plans or whether Jio sticks with the announced plan,"said the report.
JP Morgan analysis also felt a lot would depend on how many of the existing Jio users migrate into "paying" subscribers and at what level of revenues pe user.
"Given the financial strength of Reliance Industries to back Jio, they could likely play the pricing game for longer. But given that most incumbents are comfortably based on financial metrics, any pricing strategy will likely be matched and thus the market share gains would be limited for RJio."