The firm said that RJio announced a Rs 50 cut in its existing plans and/or 50 percent more data per day on plans ranging from Rs199-498 and It cut indicates pricing discipline may still be uncertain and highly dependent on consumer behavior despite consolidation in the industry paving the way for long-term structural improvements.

Ind-Ra further said, top telecoms would focus more on increasing their subscriber market share than revenue market share during 2018 and the dual sim phenomenon would continue for longer-than-expected, given low customer loyalty and high price sensitivity. Thus, the industry pricing trend is moving towards competitive pricing on long validity plans (70-90 days) to increase customer stickiness.

Two large telecoms registered an ARPU decline of 25 percent yoy each for 2QFY18. RJio reported a higher ARPU of Rs156 for 2QFY18 than the Rs 84 recorded for the industry for the period, as RJio's entire customer base comprises broadband data subscribers.

Meanwhile, broadband data subscribers constitute only 20 percent of the customer bases of other large telecoms. Non-broadband subscribers are typically low ARPU-generating customers.

The firm pointed out that the current competitive tariffs do not seem sustainable, the short-term outlook for the ARPU remains subdued, thus indicating another tough year for the telecom sector. Mounting pricing pressure, debt burden and capital outlay need to be led to the exit of small telecoms from the market. Large telecoms have prepared themselves for the continued challenging environment via asset monetization, which emerged as a key credit theme in 2017, besides industry consolidation.

In fact, Ind-Ra previously expected a recovery in ARPU in mid-to-late FY19 in view of a likely stabilization of industry tariffs at a higher level that would have led to user SIM consolidation. RJio increased pricing by 40 percent in October 2017. Thereafter, it reduced the validity of the Rs 309 plan to 49 days from 84 days. However, it has announced cashback offers to ensure customer stickiness. – Gizbot


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