Reliance Jio Prime Subscriber Numbers Good, But Retention Is Key, Analysts Say
The massive addition to Reliance Jio Infocomm Ltd's subscriber base might have come as a surprise, but analysts believe that question still lingers over the new telecom player's ability to retain these customers in the aggressively competitive market.
The telecom arm of Mukesh Ambani-led Reliance Industries Ltd. has signed up 7.2 crore subscribers in just one month of its membership programme Jio Prime, where customers pay a one-time fee of Rs 99 and recharge with a minimum of Rs 303.
This plan was supposed to end on March 31 and a new tariff plan would have come into play, but has now been extended for another 15 days.
Goldman Sachs said in a report that only 5 crore out of the 7.2 crore subscribers would remain paying subscribers for Jio by March 2018.
It is unlikely all customers who have taken Jio Prime (by paying Rs 99) will be paid customers for a period of 12 months.Goldman Sachs Report
The global brokerage sees a possibility of future price cuts or more discounts by Reliance Jio to retain customers, thereby intensifying competition in the industry.
Analysts at Citi Group said the high conversion rate of Reliance Jio's subscribers opting for the ‘Prime' offer is likely to force incumbents to react. While some of the rivals had introduced plans to counter Jio, “these were not being marketed aggressively”.
“Overall, these trends reaffirm our view that sector competitive intensity is likely to remain high despite ongoing sector consolidation,” analysts at Citi Research wrote in a note.
Here is a quick snapshot of analysts view on Reliance Jio's subscriber data:
Citi Research
- Subscribers Addition: Surpasses expectations
- Outlook: Key to watch will be how many subscribers continue to pay monthly recharges going forward
- Competition: To remain high
- Rating/Target Price: Maintain buy, target price at Rs 1,490
Morgan Stanley
- Subscribers Addition: Positively surprised
- Outlook: Expects telecom business to break even on EBIDTA (earnings before interest, depreciation, taxation and ammortization) in the second year of operations
- Rating/Target Price: Maintain overweight rating, target price at Rs 1,506
Goldman Sachs
- Subscribers Addition: Positive
- Outlook: Retention of subscribers is the key
- Competition: Competitive intensity to stay elevated longer than initial expectations
Deutsche Bank
- Subscribers Addition: Positive
- Strategy: Using ‘fear of missing out' dynamic to retain subscribers
- Competition: Likely to remain high
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