Reliance Jio’s entry in 2016 led to a major market disruption in the Indian telecom sector, as users ported to the telco’s network in massive numbers. This is evident from the fact that in a short span of three years, Jio boasts of a 300 million-plus subscriber base. However, much of these subscriber additions have taken place in the prepaid segment. Prepaid users can be easily lured with pocket-friendly packs and innovative top-up plans.

Although prepaid users constitute a large part (almost 95 per cent) of the total mobile user base in India, their contribution to mobility service revenue is not as high. In contrast, post-paid users, who form only 4-5 per cent of the mobile subscriber base in the country, generate around 25 per cent of mobility service revenues for telecom companies.

Traditionally, the post-paid market has been dominated by Bharti Airtel and Vodafone Idea and interestingly, the two telcos had managed to hold their own in this segment, despite Jio’s entry. In fact, a steady and loyal post-paid user base was one of the silver linings for the incumbents even as they were reporting net losses in their prepaid user base.

That said, the scenario is slowly changing as Jio has now set its eyes on garnering a major share of the post-paid market too.

Jio introduces Jio Postpaid Plus

Reliance Jio forayed into the post-paid segment in 2018, but failed to replicate the success of its prepaid business. Its post-paid offerings were not considered up to the mark as compared to those provided by incumbent players such as Airtel and Vodafone Idea. However, it has now revamped its offerings, which may turn the tide for the telco.

During its 2019 annual general meeting, Reliance Jio unveiled the Jio Postpaid Plus plan. Unlike its predecessor, which was launched as a single plan of Rs 199 with limited benefits, the Jio Postpaid Plus plan comes with a host of benefits. As part of this plan, the operator is offering priority SIM set-up service, seamless connectivity between devices, data sharing and discounted international roaming plans. Given the amount of complimentary services bundled with Jio Postpaid Plus, it is expected to be introduced as the premium variant of the existing Jio post-paid service.

With the announcement of Jio Postpaid Plus, the tariff war plaguing the telecom sector is set to enter a new phase, wherein the focus area would move away from prepaid and towards post-paid. Consequently, the other incumbent operators are also making efforts to strengthen their offerings so as to minimise customer churn in the premium segment.

Airtel strengthens its offerings

Airtel is now coming up with another premium subscription plan for its high-paying elite customers. This new offering is called Airtel Black and is being introduced as part of the recently launched Airtel Thanks programme. As part of this new offering, Airtel will be providing better content offerings from third-party OTT platforms as well as its own Airtel TV Premium, lounge access, discounts on consumer brands, international roaming, health insurance and bundled apps, among various other benefits. Since Airtel Black will be available to users subscribing to the Rs 999 and above plans, the operator hopes that this scheme will encourage its lower-tier Airtel Thanks users to upgrade to more premium plans.

Apart from this, Airtel has also been refining its existing post-paid offerings so as to drive more revenues from this high-paying post-paid customer group, which makes up 5-7 per cent of its 284 million subscriber base but contributes 20-25 per cent of the revenue. As part of this move, Airtel recently scrapped its low-value post-paid plans, those that are below Rs 499, across all circles. Further, Airtel is also reconsidering its pricing strategy and is offering fewer but more diversely priced plans instead of offering a plethora of closely priced plans as it was doing earlier. To this end, it recently reduced the total number of post-paid plans to four. Airtel has discontinued Rs 299 and Rs 399 plans along with the Rs 649, Rs 1,199 and Rs 2,999 plans. It now offers just four post-paid plans: Rs 499, Rs 749, Rs 999 and Rs 1,599. The Rs 499 plan has now become the entry point for post-paid customers.

All these initiatives by Airtel are driven by the attempt to boost ARPUs.

Vodafone Idea needs to pick up pace

Vodafone Idea, like Airtel, has also been focusing on boosting its ARPU by redefining its post-paid offerings. To this end, Vodafone Idea has also withdrawn some of its low-value post-paid plans. Earlier, in June 2019, the operator started notifying its customers through messages that their plans had been upgraded. For instance, the Rs 199 plan got upgraded to Rs 399.

However, the operator might soon have to make notable alterations in its existing post-paid offering or come up with newer and more attractive plans in order to effectively counter Reliance Jio’s post-paid offering and ring-fence its post-paid users so as to minimise customer churn.

The way forward

A key differentiator between Airtel’s and Vodafone Idea’s efforts and those of Reliance Jio is that while the former’s initiatives are driven by the goal of boosting revenues, the latter’s are driven by the goal of expanding its user base. Reliance Jio has already garnered over 340 million subscribers in around two and a half years. At this rate, industry analysts predict that Reliance Jio might be able to reach its target of 500 million users in another two years. In fact, as per industry sources, the announcement of the Jio Post-paid Plus offer is aimed at boosting the subscriber base of the operator and driving it closer to its target of 500 million users.

Going forward, Reliance Jio might replicate its prepaid strategy of affordable plans in the post-paid segment as well. The operator might come up with more number of cheaper plans, while offering more data and bundling various other benefits such as subscription to OTT platforms, among various other such things. Furthermore, Reliance Jio may bundle its post-paid offering with its fibre-based home broadband services in an effort to further strengthen its post-paid business.

Of course, disruption in the post-paid segment may prove to be costly for incumbents Airtel and Vodafone Idea since they derive a major part of their revenues from this segment.

Diksha Sharma