Analyst View Point
by Faisal Kawoosa, Head – New Initiatives, CMR
RIL in its 41st AGM announced that Jio has over 215 million subscribers. This is 90 million increase compared to 125 million announced in last AGM in July 2017. These 90 million subscribers have been added as 25 million through JioPhone, 5 million from JioFi and remaining 60 million from Smartphones of different brands that were sold during the period.
As per CMR’s India Monthly Mobile Handset Report, India shipped roughly 116 million 4G Smartphones between August 2017 to June 2018. As compared to this only 60 million subscribers were added by Jio over a Smartphone. These would include already existing Smartphone users who would have got a Jio service during the period, relatively recently. The point here is Jio subscribers are not coming in from Smartphones as much as is the potential. This is not a good sign for the operator.
Even for JioPhone, the cumulative shipments have been a little over 50 million as per CMR’s India Monthly Mobile Handset Report estimated till end of June 2018. There are only 25 million subscribers on the network using a JioPhone as was announced by Mukesh Ambani at the AGM. This is again not a healthy indicator. Definitely, there isn’t this much of inventory left. One can only presume that many JioPhone users would have dumped it after initial experimentation out of curiosity. From JioFi perspective, it is always a minuscule addition to the overall picture.
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Holistically, it looks very difficult for Jio to cross 300 million subscriber mark, primarily banking upon JioPhone. Now that JioPhone 2 is for Rs 2999, it becomes even closer to a full-fledged Smartphones in terms of pricing. We at CMR feel Jio might slow down around 260-275 million mark of subscribers and it will be a herculean task to cross 300 million subscribers.
Another interesting and anticipated announcement was of Jio GigaFibre. Again, here Mr Ambani mentioned that he expects a potentially 50 million users for this service over a period of time. Potential without reference of time is useless. There was no reference of within what time period Reliance expects this. India is currently having approximate 18 million fixed broadband users and early adopters of Jio GigaFibre would come from these users primarily. Even with the best of offers, CMR does not expect Jio to get more than half a million of subscribers in its first year. There is also an upfront cost of Jio GigaRouter which CMR expects to be in around Rs 2500-3000 along with the offer. As video is the primary use of data in India with over 65% of data consumed as video in India as per the latest Nokia MBit report; users will also want to have the Set Top Box. This would be additional Rs 2000-2500 being supporting 4K content. So, effectively a user would have to spend upfront around Rs 5000 to start using Jio GigaFibre services. This too, when devices are subsidised by Jio. India witnessed fixed broadband services since 2005 in essence and over these 13 years, there are just 18 million subscribers added. With this legacy, achieving 50 million by a single operator seems highly unlikely. Even from device penetration point of view, this is very ambitious. Among all Internet capable devices, Smartphones have the maximum penetration. As of June 2018, end, India should be having more than 425 million broadband users that will include those connecting over a Data card other than an Internet capable mobile phone including JioPhone. With average household size being 4.7 members per family in India as per the last decadal census of 2011, these broadband internet users are spread over 90 million households in India. So, what Jio is expecting is having more than 50% market share in the fixed broadband market over a period of time, assuming all existing broadband users will go for a fixed broadband. This is only hypothetical even in thinking.
Jio has definitely pushed ahead the growth in terms of market as well as technology adoption in India. However, they are definitely expecting too much out of the market potential and effectively every India going digital is a wrong assumption, even if the services are free or almost free. The journey is a longtail one and Jio along with the incumbent operators have to have the patience. We must all be reminded of the Law of Diminishing Returns and this applies to businesses as well. The growth that Jio witnessed in the initial year is impossible to be replicated and the growth they can realistically achieve now may not repeat in future.
