Further delay in launching 4G service may Cost Reliance Jio's 100 million Subscriber in one year !!

A further delay in launching 4G services to March could make it difficult for Reliance Jio Infocomm to poach high-end subscribers from top incumbents Airtel, Idea Cellular and Vodafone India who will have a first mover advantage, brokerage Bank of America Merrill Lynch has said.

The brokerage firm, in a note dated October 30, said it expects all the big three telcos to have rolled out 4G selectively in key urban areas before March 2016. It also expects their top-end (high-usage) consumers to migrate to 4G.

The top 5 per cent customers - who contribute 25 per cent to revenue - of the big 3 are likely to be sticky and unlikely to switch at a time when their existing operator is also offering 4G services, it said. "We think that Jio would need to focus on offering a differentiated service as aggressive pricing alone would not be able to help Jio have a sustainable advantage," the note said.

However, Jio is likely to end up with the highest 4G subscriber market share from financial year ending 2017 onwards, when it should hold 45 per cent, way ahead of Bharti Airtel which with a 22 per cent will be a distant second player, BoFA-ML said. Along with Vodafone and Idea, the top three incumbents are expected to have a combined over 53 per cent of the 4G subscriber share. By FY2020, Jio's share is likely to be 36 per cent, while the other three could have over 60 per cent.

Mukesh Ambani-owned Jio, which had bought its initial 4G airwaves back in 2010, said it expects to launch services around December 2015, but there is increasing speculation that it will be delayed to the next fiscal year starting April 2016. By then, Vodafone and Idea would also have launched their 4G services. Airtel has already rolled out its high-speed broadband services across over 300 towns and is aggressively expanding further.

Analysts at BoFA-ML also expect the service launches matched by a sharp fall in prices of handsets supporting 4G to boost adoption of the technology, even at he cost of 3G whose adoption is just about picking up pace. "In the next few years, we expect to see limited differentiation between 3G and 4G - tariffs and smartphone prices," the report says. As a result there would be limited value for consumer to be on a 3G network when compared to 4G, which offers far higher average speed compared with 3G. "We hence expect a faster acceleration towards 4G and see a large proportion of 2G subs leapfrogging 3G and moving to 4G," the brokerage added.

However, a switch to 4G might not see an increase in the average revenue per user (ARPU) for the top three incumbents, similar to developments in other markets such as Malaysia, Thailand and China, owing to fierce competition.

Many analysts believe Jio's mix of spectrum in 2300 Mhz band and 800 Mhz band and its spectrum sharing and trading tieups with Reliance Communications will give the company an edge over rivals
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