The wired telecom sector has created significant interest over the past few weeks with the entry of Reliance Jio offering 100Mbps to 1GB speed starting from Rs699 to Rs8499 per month. However, the plans offered by Jio are unlikely to drive a significant churn in the market, says CRISIL.
In a research note, the ratings agency says, "The lack of pricing aggression and non-attractive bundled pricing would result in limited disruption in the underpenetrated wired broadband market. Further, higher non-refundable deposit fee of Rs2,500 and additional cost for premium content would also dampen prospects."
JioFiber’s base plan starts at 100Mbps for 100 GB data limit (plus 50 GB extra for six months). The base plan of most other wired broadband providers starts at 50Mbps for almost the same amount of data, if not more.
While Jio’s pricing per GB is approximately Rs4 for the base plan, other operators are also in a similar range. Government owned BSNL's cost is much lower at Rs2 per GB. Among premium plans, JioFiber’s price per GB is about Rs1.2-Rs1.6, again in line with competitors.
JioFiber has also introduced some differentiated offerings including speeds of 1 Gbps, television set on annual subscription of higher-end plans, and other value-added services such as virtual reality sets, home security, content sharing, and device security.
However, according to CRISIL, these niche services are not the primary hook for customers at present, for ‘smart homes’ are yet to capture public imagination and wallets. Moreover, it says, "current speeds of 50-200Mbps offered easily fulfil the data needs of households. Giga-speeds would find applications mostly in internet of things (IoT) use cases, the uptake of which, we believe, is still some time away."
India currently has 18.4 million broadband subscribers as of March 2019 as per the Telecom Regulatory Authority of India (TRAI)’s report. With a mere seven connections per hundred households, India’s wired broadband market is highly underpenetrated. In comparison, developed nations such as the United States, the UK, France, and Japan have 30-50% penetration levels.
The broadband subscriber base in India has been expanding at a snail’s pace over past five years due to relatively high tariffs in wired broadband compared with wireless and lack of focus among telcos in the wired broadband space.
In contrast, India has high television penetration of about 65%, with around 190 million households owning cable or direct-to-home (DTH) connections.
Of this, about 167 million households are without wired broadband connections (assuming a household with wired broadband will also own television). These households could have been a ready target market had broadband services been bundled with TV subscription at competitive rates, CRISIL feels.
It says, "With the new entrant’s pricing giving no indication of bundling TV cable services, this market would largely remain untapped for now, narrowing the possibility of a significant uptake in broadband penetration. However, the acquisition of Hathway and Den networks gives JioFiber access to 14 million cable TV homes to push its broadband offerings."
While there would be no major churn in broadband segment, the ratings agency sees the average revenue per user declining marginally over the next few months as other players try to match JioFiber's pricing to protect their market share.
"We believe consolidation in the sector is also some time away. Further, emerging developments in terms of pricing in the television distribution space will remain a monitorable. So intense attrition is unlikely in the road ahead," CRISIL concluded.