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Reliance Jio is not exactly aimed at Indian data users

RIL chief Mukesh Ambani announced that Jio has the world's cheapest data plan, which effectively costs Rs 50 for one GB (rates go down further with higher data plans). Subsequently, Ambani unveiled tariff plans that range from Rs 149 to Rs 4,999 for 28 days.

twitter-logo Manu Kaushik        Last Updated: September 1, 2016  | 19:57 IST
RIL chairman Mukesh Ambani
RIL chairman Mukesh Ambani

Manu Kaushik, Associate Editor, Business Today
With the launch of Jio telecom services after much delay, the market is expected to see a tariff war between incumbent operators such as Airtel, Vodafone and Idea. At the 42nd annual general meeting of conglomerate Reliance Industries, its Chairman and Managing Director Mukesh Ambani announced that Jio has the world's cheapest data plan, which effectively costs Rs 50 for one GB (rates go down further with higher data plans). Subsequently, Ambani unveiled tariff plans that range from Rs 149 to Rs 4,999 for 28 days.

Unless there are more tariff plans that the company launches at a later date, Jio's is not exactly aimed at data users. Take a look at the monthly data plans. The cheapest monthly plan - for Rs 149 - has free unlimited voice, 100 SMSes, and just 0.3 GB data (about 300 MB). The next plan is for Rs 499 which has free unlimited voice, unlimited free SMSes and 4 GB data. There are five other plans, ranging from Rs 999 to Rs 4,999, for users with higher data requirements.

So, there are no plans between 300 MB and 4 GB. As per Ericsson Mobility Report India edition, the data traffic per smartphone user stood at 1.4 GB per month in 2015. The difference between 300 MB and 4 GB is vast, and that's where the bulk of the existing users lie. Even for new consumers, 300 MB is going to be less than their needs whereas the 4 GB plan (which costs Rs 499 plus taxes) will be expensive.

In addition, the lowest priced data plan - Rs 149 - is still higher than the average revenue per user (ARPU) rates of Rs 127. That means an average telecom user spent just Rs 127 on telecom services per month during three months ending March 2016. By making voice calls free, Jio will be able to attract a bulk of low-value users as they will spend a tad more per month for unlimited voice calls, but for data users, the Rs 149 plan seems unattractive.

Now, let's look at the effective rate of Rs 50 per 1 GB. During his speech, Ambani compared his Rs 50-1GB plan with telcos who he claimed charge Rs 250 for 1 GB. A back-of-the-envelope calculation shows that none of the plans that are launched today are effectively priced at Rs 50 per 1 GB. Two plans, that's 60 GB plan for Rs 3,999 and 75 GB plan for Rs 4,999, are effectively priced at Rs 66.65 per 1 GB. These calculations are exclusive of unlimited 4G access at night and access to its Wi-Fi hotspots that are bundled in six out of seven plans.

But here's the catch. In order to woo customers, the company has kept everything - voice, data, and access to its apps - free for a period of 118 days ending December 31, 2016. During this period, the company will try to build a strong subscriber base, including converting some existing users of Airtel, Vodafone and Idea into Jio users. But as soon as the standard tariff plans apply, it would be difficult for Jio to make these consumers pay after December 31.

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