NEW DELHI: Bharti Airtel could be forced to respond with price cuts on its fixed line broadband plans that are currently uncompetitive and charge up to a 15% premium to Reliance Jio’s new JioFiber plans, analysts said.
JioFiber launched new rate plans on Monday with the cheapest starting at Rs 399, increasing rates by 15-18% to Rs 999 and Rs 1,499. However, the higher price is also accompanied by higher speeds, data allocation and combined subscription to OTT applications.
Jio offers a one-month trial at Rs 399 with a free return option.
“We believe that Bharti Airtel should also benefit from increased adoption of fixed broadband given its presence in the network … we note that Bharti Airtel’s current broadband plans are now not competitive for Jio as some of them have a ~ 15% premium over new Jio plans with lower data allowance compared to Jio, ”Credit Suisse said in a note.
BofA Securities, in a separate note, said that Airtel may now be forced to respond to price cuts to maintain its own momentum, which is marginally negative for the company as it may cannibalize its current broadband revenue.
Fixed broadband only contributed 2.4% and 3.4% of Airtel’s consolidated revenues and EBITDA, respectively, in the first quarter.
Bharti Airtel’s broadband business grew 1.1% sequentially, driven by strong gross adds. However, some of this growth was hampered by the temporary closure of small offices and stores that chose to turn off their service during the shutdown, the telco recently said.
The content package in Airtel’s broadband offering has been reduced in the last two years and Netflix and Hotstar are no longer offered as part of the package.
Credit Suisse said the Sunil Mittal-led telco may also need to offer more integrated OTT streaming subscriptions in addition to adopting unlimited data plans.
Jio’s move to revamp JioFiber’s broadband plan is a change from the original strategy in which it offered the same price points as the competition, but provided better value compared to copper connections along with the combination of IoT, AR and VR devices.
BofA said that Jio’s fiber strategy is similar to its wireless strategy, which revolves around winning users by offering lower rates than its peers and eventually monetizing using other avenues such as digital advertising and subscription.
JioFiber’s Rs 399 basic package offers 30 Mbps but does not have access to OTT applications; the existing (and currently popular) Rs 700 offers 100 Mbps but now has no access to apps; Rs 999 and Rs 1499 packages offer 150 Mbps, 300 Mbps and have access to 11-12 OTT applications. The Rs 1499 is the only plan that offers Netflix subscription.
“In our view, the change in prices would be driven by limited traction so far and gradual growth,” BofA said, adding that Jio could be trying to capitalize on Covid-led demand due to “customer pull” due. to the WFH, home study and home entertainment.
RIL President Mukesh Ambani recently said that Jio was looking to connect 50 million homes and business establishments, having installed 1 million connections. “At the current rate, RIL is unlikely to achieve its already lofty goal,” BofA said in the note.
“Jio’s new Rs399 plan is a potential game changer in our opinion, as it may increase fixed broadband adoption in India with Jio scaling the reach of its network,” Credit Suisse said.
India currently has very low fiber and fixed broadband penetration of 7% and 1%, respectively, compared to 20-60% of other Asian countries, according to Credit Suisse estimates.
Analysts added that Jio’s new fiber plan will increase the competitive intensity in low-end plans, which will grow the fixed broadband sector in the country.
Insufficient investment in fixed lines and low affordability for consumers have been the two main reasons for the low penetration of broadband in the country.
Public sector telcos, BSNL and MTNL, have plans affordable at Rs300-500 per month, but the data allowance and speed in these plans are limited (60-100GB / month), restricting adoption at large. scale due to bad network experience and bill crashes. .
Credit Suisse said the broadband subscriber base is expected to grow at a CAGR of 11% over the next five years versus 4.5% CAGR in the past five years.
He added that the broadband subscriber base is expected to grow at 11% CAGR over the next five years versus 4.5% CAGR in the past five years, and fixed broadband penetration will increase to ~ 11% for FY25E primarily due to to strong growth in Jio’s subscribers.
“With the expected acceptance of Gaming, Ed-tech and Health-tech along with OTT entertainment applications on TV (slightly different value proposition and even marginally different applications compared to mobile applications), we see that more data related to the consumer. This should help Jio attract more attention and therefore better digital ad revenue alongside subscription revenue, ”said BofA.
BofA added that market feedback on “value for money” packages, especially to see acceptance in Tier 2/3 cities, could also be part of Jio’s new broadband strategy. “We also see the adoption of fiber broadband as a secular trend in India, given the momentum from customers and the push from Jio / Bharti telcos to expand into Tier 2/3 cities.”
Airtel CEO Gopal Vittal said during a recent earnings call that the telco is doubling down on its partnership with local cable operators to expand its home broadband services and seize the opportunity in smaller cities around the world. India.
“We also believe that there is a great opportunity in the smaller cities of India in the domestic broadband market. We are now living in 14 of those cities through this partnership model,” Vittal said during the first results conference. quarter of fiscal year 21.
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