According to Goldman Sachs, Reliance Jio’s latest postpaid offer does not signal a new tariff war in the industry and does not rule out the possibility of prepaid tariff hikes within this year.
Recently, Jio launched Rs 399 postpaid bundled offer with over-the-top (OTT) subscription, higher than its already existing Rs 199 postpaid plan.
Further, the firm added that Jio has not cut the price of its existing Rs 199 plan, but has introduced new plans at 2x the tariffs of its existing plan, which according to Goldman Sachs, is not a start of a new tariff war. Goldman also believes Jio needs a prepaid tariff hike more than its peers.
Further, it added that almost the entire revenue base of Jio is prepaid, with 80 per cent of that coming from smartphones. Thus, any tariff cut in this segment, or delay in tariff increase, would impact Jio’s revenue/ earnings before interest, taxes, depreciation, and amortisation (EBITDA) the most.
Around 50 per cent of Airtel’s user base comes from the corporate segment where tariffs are offered at a negotiated rate, and OTT subscriptions are not likely a differentiating factor, it added. Further, Goldman Sachs said that for the retail segment, if all customers were offered bundled OTT subscription, there can be a 3 per cent negative impact on Airtel’s financial year (FY) 2022 consolidated EBITDA.
Commenting on Vodafone Idea (Vi), it said that, while, telco’s overall subscriber base has declined 34 per cent in two years, its postpaid base has only fallen by 10 per cent. However, the firm expects continued erosion in Vi’s market share. It added that despite a weaker network when compared to its peers, the telco has largely held on to its customer base so far, reinforcing that this segment has very high customer stickiness.
Goldman believes OTT subscriptions in postpaid plans might be helpful in retaining users or reducing churn, but it is not a key differentiator for adding new customers.