Analyst calls Reliance Jio’s GigaFiber targets unrealistic

Jio’s subscriber base | CMR

Market tracker CyberMedia Research has called Reliance Jio’s 4G and GigaFiber broadband subscriber targets unrealistic, and said it did not see the company meeting the year-end target of 300 mln for its 4G service or the 50 mln target for its fiber broadband service.

“We at CMR feel Jio might slow down around 260-275 million mark of (4G) subscribers and it will be a herculean task to cross 300 million subscribers,” said Faisal Kawoosa,┬áHead of ‘New Initiatives’ at CMR.

He also added that the broadband target of 50 mln is “highly unlikely”.

However, this is not the first time CMR has failed to accurately predict Jio’s growth trajectory, and the agency may be misreading Mukesh Ambani’s designs for the sector.

A year ago, CMR had said it expected the operator to lose most of its test customers when it stopped its free services. But the prediction was proven wrong when the company successfully retained over 80% of its users by introducing almost-free calling and data plans.

JIO GIGAFIBER

In an update, Kawoosa said Jio was setting unrealistic targets for its just launched fiber broadband-cum-IPTV service GigaFiber or GigaTV.

The Mukesh Ambani-firm said it plans to enroll 50 mln, or 5 cr connections, for its service. Given that it’s a household service, that would have to cover about 250 mln (25 cr) users, or about one ffith of the Indian population.

However, said Kawoosa, even after 13 years of fixed broadband services in India, the country has just 1.8 cr (18 mln) connections between all players — a far cry from Jio’s 50 mln target just for its service.

“Even with the best of offers, CMR does not expect Jio to get more than half a million of subscribers in its first year,” Kawoosa said.

He said estimated that subscribers would have to spend around Rs 5,000 to get a connection.

The router itself will cost around Rs 2500-3000. But subscribers will also buy a set-top box as well, he noted.

“This would be additional Rs 2000-2500 being supporting 4K content. So, effectively a user would have to spend upfront around Rs 5000 to start using Jio GigaFibre services. This too, when devices are subsidised by Jio… achieving 50 million by a single operator seems highly unlikely,” he added.

Kawoosa, however, gave Jio credit for pushing market adoption of new technologies like 4G. Jio has pushed India to the No.1 spot in terms of mobile data consumption within two years of launch.

“However, they are definitely expecting too much out of the market potential and effectively every India going digital is a wrong assumption, even if the services are free or almost free,” he said.

“The journey is a longtail one and Jio along with the incumbent operators have to have the patience. We must all be reminded of the Law of Diminishing Returns and this applies to businesses as well. The growth that Jio witnessed in the initial year is impossible to be replicated and the growth they can realistically achieve now may not repeat in future.”

MISREADING THE TARGET?

The comments from the analysts, however, also point to the larger question of whether the market is misreading the intention of Reliance Jio.

Ambani has given enough hints that he is not trying to target the traditional broadband users, but to leverage new technology to revolutionize the communication-cum-entertainment sector of India.

Jio’s GigaFiber service will be a combination of high-speed internet access, video-on-demand, broadcast & IPTV, music, video conferencing and e-commerce and others, all enabled by a single, fast connection.

As such, instead of targeting the 1.8 mln fixed broadband users, Ambani’s real target is likely to be the 100 mln cable TV users and an almost equal number of DTH users.

Out of these 200 mln (20 cr) cable and DTH households, Jio can already address the estimated 40% (80 mln) who are located in and around the 1,100 cities where Jio plans to start its fixed service next month.

In other words, to achieve the target of 50 mln, Jio has to get a market share of just above 60% in these 1,100 cities.

To achieve this, the Ambani-led company is likely to aggressively buy up local cable operators, replace their copper cables with its fiber broadband and their set-top boxes with its fiber routers and IP-based entertainment hubs.

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