Jio’s new post-paid plans attractive, not disruptive: IIFL Capital Services

20 Mar 2023 , 10:44 AM

Their analysis suggests: 

• These offer more options for customers. 
• They offer a lower entry-point by dropping third-party OTT apps. 
• Plans where third-party OTT apps are retained have either seen a price hike or unchanged price. 
• Only a few plans have seen Jio’s discount versus Bharti widening from earlier. These, coupled with the fact that post-paid subscribers are relatively less price sensitive, make analysts at IIFL Capital Services believe that Jio’s new plans are attractive, but not disruptive. 

Once Jio’s 700MHz network is in place, superior indoor coverage could strengthen its bid in the high ARPU segment, which has proved to be a hard nut to crack. While analysts at IIFL Capital Services expect Bharti to hold its own (recently Bharti matched Jio’s unlimited 5G plans), Vi could be vulnerable considering its lack of 5G and coverage gaps in 4G. That said, corporate postpaid segment (~50% of post paid) of Bharti and Vi is relatively insulated.

Jio’s post-paid plans offer more choices to customers

While Jio currently offers family plans (with up to three add-on SIMs for family members), these come bundled with Netflix and Amazon Prime. Jio has now announced two sets of family plans – a set with these OTT apps and the other one without. While the new set with OTT apps has seen unchanged or higher prices versus current plans, the ones without OTT apps are 17-30% cheaper than the existing plans. In other words, Jio has lowered the entry barrier to the post-paid market by providing a cheaper option for customers who do not want to get bundled OTT content.

Jio’s new plans up to 38% cheaper than Bharti’s

With Bharti’s plans priced Rs499 and above offering bundled OTT content, Jio’s new plans are up to 38% cheaper based on total outlay (without factoring in imputed value of OTT). While the presence of OTT apps by themselves may not induce an existing pre-paid user to switch to post-paid, OTT apps are good-to-have and a relatively price-inelastic post-paid subscriber may not down-trade to a cheaper plan, especially if it does not have OTT apps. Hence, analysts at IIFL Capital Services look at the value proposition of Jio’s new plans after assigning some value to OTT apps (after adjusting for nuances like limited-period free offers of some OTT apps).

JIO’s discount to Bharti has incrementally widened only in a few plans

Analysts at IIFL Capital Services have looked at the change in Jio’s premium/discount to Bharti before and after the current post-paid interventions. They conducted this both on a total outlay basis and on implied pricing after ascribing value to OTT. They observe that except for three instances, the new plans have seen Jio’s discount to Bharti narrowing. While this does not capture all permutations and combinations, overall outcome is unlikely to significantly change, the entire superset is to be considered.