Analysts view on Jio’s new device

Jefferies India

The brokerage believes that Jio's new device offering is aimed at gaining share among the 250 million 2G users in India as both the device and the service have been priced at an attractive 20-30% discount.

The global brokerage said the move could drive 20-22 million subscriber additions for Jio annually, resulting in a 2-3% boost to its FY25 revenues and EBITDA. At the same time, this may impact Bharti's FY25 revenue and EBITDA by 1-2%. “While this move does not bode well for tariff hikes, it may consolidate the market into an effective duopoly sooner,” it added.

The phone, which will be available for sale from July 7, will work only on Jio's network and comes with entertainment apps from the Jio stable (Jio Cinema and Jio Saavn) pre-installed. Jio has also come out with new tariffs for this device at ₹123 for 28 days and ₹1,234 annually (12 x 28 days). These plans will offer unlimited voice and 0.5GB data per day.

Citi

According to analysts at Citi, the monthly recharge plan is effectively around 32% cheaper than Bharti’s entry level 2G recharge plan of ₹155 that offers unlimited voice and 1 GB of data for 24 days. Vodafone Idea’s entry level 2G recharge plan is still ₹99 for 28 days (barring a couple of circles where its validity has been reduced), though this plan offers limited talk time.

The brokerage estimated the feature phone segment contributes 20% of mobile revenues for Bharti and 30% for Voda Idea. “However, given the extremely price-sensitive nature of this segment, we do not believe these revenues are immediately at risk as subscribers are unlikely to be willing to spend an additional ₹1,000 upfront to purchase the phone right away. Nevertheless, this could help Jio grab market share among new feature phone sales and thereby expand its subscriber base in the 2G segment,” it said.

“Jio’s increased focus on grabbing new subscribers could also be perceived as further reducing the likelihood of any near-term tariff hike,” it added.

J.P. Morgan

Another global brokerage J.P. Morgan said that this disruptive move can halt incremental tariff increases for 2G and help Jio gain share in that segment. Bharti recently raised 2G prices from ₹99 to ₹155 across all circles while Vi took this in one circle.

“We believe this is negative for Bharti as any hopes of a tariff hike should be diluted over the next 12-18 months. We believe a combination of higher 5G capex, a lack of tariff hikes and deflation in premium ARPUs will drive down ROICs for Bharti,” it added.

The agency has maintained underperform ratings for both Airtel and Vi.

“We believe JioBharat can again transition over 100 million subscribers if there are no supply chain or product-performance hiccups. Vi and Airtel had 103mn/111mn 2G subscribers, respectively, at Q4FY23-end, and the shift of 40% of 2G users to JioBharat may impact their India mobile revenue by 11%/8% ‘and impact mobile EBITDA by 19%/11%. It will impact Airtel’s consolidated EBITDA by 6%.”

“The launch will delay the tariff hike discussion further, which will likely impact Vi more. We retain our long-term positive stance on RJio and Airtel,” it added.

Emkay

The brokerage house said that JioBharat is better placed to disrupt the market versus the original JioPhone in 2018, as it is a more-focused product, has simpler value proposition and has better distribution and production planning.

“The launch will delay the tariff hike discussion further, which will likely impact Vi more. We retain our long-term positive stance on RJio and Airtel,” it added.

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