Shares of Reliance Industries rose 3.5% today — an extraordinary move for such a large company — after it emerged that not only did the company not lose subscribers when it made the transition from free to paid services in April, it actually added a few million.
The result was that the new entrant had as many paying high speed data (3G+4G) customers at the end of its first month of commercial operations as Bharti Airtel, Vodafone and Idea had taken together.
NO CLIFF EFFECT
The Reliance Industries subsidiary had 108.7 mln subscribers at the end of its ‘free period’ (March 31). This was expected drastically come down when it made the transition from free to paid services in April.
CyberMedia Research, for example, predicted in March that the company would lose 55-60% of its connections when it went ‘pay’ in April.
“CMR believes that only 40-45% of the existing Jio subscribers will continue to use their services after the ‘Happy New Year’ offer expires by March 31st, 2017,” the agency had predicted close to the transition period.
Business news channel ET Now reported that only 13% — or about 15-16 mln — users had opted for the company’s paid plans as of March 28 — three days before the deadline.
It was not just the analysts who under estimated the newcomer’s impact on the market.
Speaking in October last year, Bharti Airtel CEO Gopal Vittal expected Jio to add around 40 mln subscribers before slowing down due to the lack of 4G handsets in India.
“As of now, they might have probably 25 million-26 million customers,” he said in October. “They are still adding at the rate of maybe 400,000, 300,000 to 500,000 a day, which means that by December you could potentially see 40 million customers in that ballpark. And after that there could be some slowdown because of the sheer absolute number of 4G devices in India.”
Not surprisingly, when Jio announced it had crossed 100 mln subscribers in March, many attributed it to users resorting to buying multiple connections to take advantage of the free data offer, which was capped on a per-connection basis.
This made it all the more likely that there would be a drastic drop off in April when the freebies got over and the time came to pay for data.
The average Street estimate was for a drop to about 75 mln subscribers.
Instead, according to numbers released by the regulator today, the company reported an increase of 3.9 mln subscribers in April to 112.6 mln users.
Part of the reason for the unexpected success of the company in retaining its subscriber base could have to do with its ‘Summer Surprise Offer’ that allowed existing customers to continue their freebie plan for another three months by spending Rs 402, as many indeed seem to have done.
These numbers also mean the new entrant started its commercial operations with twice as many paying high-speed data customers compared with the market leader Bharti Airtel. Against Jio’s 113 mln, Airtel had only 50 mln 3G+4G customers at the end of April.
Other players were even further behind. Vodafone had 39.75 million high-speed data customers, Idea Cellular had 24 million and Reliance Communications had 14 mln.