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Reliance Jio to launch new plans on Thursday, offers 100% cashback

Reliance Jio, India’s most popular wireless data provider, said it will introduce new plans from Oct 19, and that it was offering “100%” cashback on its popular recharge of Rs 399 that gives three months of services.

In a promotion put up on its website, the company said the 100% cashback was a Diwali offer, and that new plans will be effective from Thursday Oct 19. Anyone recharging during till Oct 18 will get cash vouchers that can be used to buy Jio services later.

Further details have not been revealed yet. However, it indicated that prices may be going up from next week as it urged users to “recharge now, store and use later”.

The move to revise tariffs was widely anticipated, both by rivals and consumers.

While consumers hope that the company will continue to offer value-for-money plans, rivals are hoping that it will continue to increase prices — helping them to do so as well.

According to TRAI, prices of wireless data have fallen by about 97% in one year after the entry of Reliance Jio, from about Rs 200 per GB a year ago to about Rs 6 per GB in the June quarter.

While operators like Bharti Airtel and Idea Cellular used to offer 1 GB of data for Rs 250, they now offer about 50 GB for the same price.

The reason remains with Reliance Jio, which unleashed a flurry of cheap, or even free 4G packs as part of its inaugural offers.

UPTURNED MARKET

The company has irreversibly changed the market from a pricing-focused one to an ARPU-focused one.

In the price-focused market, companies like Vodafone and Airtel tried to keep prices high, volumes low and margins fat.

In the volume-based game, pricing is dictated by two factors — the ability of the network to support demand, and the need to increase consumption by users.

While the second factor — the need to increase data use — puts a downward pressure on prices, the first factor — network stability and quality concerns — puts a bottom on how low they can be kept.

Success in this new telecom game depends almost entirely on network capacity.

The more capacity the network has, the lower you can price your offering and the higher you can drive consumption.

The latest ‘Diwali’ cashback offer, and the new plans coming up on Oct 19 are crucial from this point of view.

They will indicate whether the Mukesh Ambani company is feeling the pressure of high network usage, or whether it wants to increase consumption even more by making data even cheaper.

At present, the lowest cost plan from the 4G provider is Rs 399, which gives 84 GB of data and unlimited voice calls for 84 days.

Assuming that half of the pack cost is for voice, the plan prices data at Rs 2.38 per data. However, on average, a user on such a plan consumes only about 8 GB per month, or 24 GB, which pushes up the actual realization to Rs 8.33 per GB for the operator.

Jio was originally supposed to increase its price by 50% after three months of April launch — from Rs 100 per month to Rs 150 per month — and then by 100% after another three months — from Rs 150 per month to Rs 300 per month.

Indeed, it carried out the first step of its transition in July by cutting the validity of 309 offer from 3 months to 2 months — increasing the per-month price to Rs 150 from Rs 100.

It is the second step — going from Rs 150 to Rs 300 — that is going to be more difficult to carry out.

This because the average telecom consumer in India spends only about Rs 150 per month.

The company, on the other hand, believes that it is possible to entice people to spend more by offering them compelling data services in addition to just voice.

How much of that conviction remains in place will be seen when the new tariffs are unveiled next week.

Meanwhile, the entry of the new operator and the subsequent shift in the business model has already caused far reaching changes in the Indian telecom market, with No. 2 and No. 3 operators choosing to merge with each other and the No. 1, Bharti Airtel, swallowing up smaller players like Telenor.

Others, like Tata Teleservices, Reliance Communications and Aircel Cellular, are facing existential problems.

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