Despite media reports claiming that Reliance Jio has extended its free Welcome Offer to March, company sources indicate that such a decision has not been taken.
The offer, which includes free voice and data usage, was unveiled on Sept 5 by Mukesh Ambani at Reliance Industries annual general meeting. At the time, Ambani had said that the company ‘may’ extend the offer if rival operators do not play nice with it.
It has, since then, repeated this ‘threat’, most recently at the quarterly result announcements a week ago. It also told stock analysts that the company would be well within its rights to offer free services till whatever time it feels comfortable with, and would not be in violation of any rules.
Meanwhile, some sections of the media are reporting that the company has extended the offer.
“Three days after the news about Jio being available only till December broke, the company has extended the deadline,” said an article by Yourstory.com.
When we checked, sources in the company said such a decision has not been taken yet. The company, which announces all its major decisions to the media and the stock exchanges, has also not made any announcement in this regard.
It is possible that Jio is sending a strong signal to its rivals that they should start co-operating with the company very soon or they could end up seeing a big decline in their business.
Both Bharti Airtel and Idea Cellular have admitted in recent interactions with the media that Jio’s free services are having an impact on their revenue and earnings in ongoing quarter of October to December.
The results of October-December period will be announced in January, and going by industry sources, these won’t be pretty.
So far, both Bharti Airtel and Idea Cellular have not seen a large scale disruption of business thanks to initial difficulties faced by Jio in activating new subscribers. But the activation process has since been overhauled and is running along smoothly.
According to Bharti Airtel CEO Gopal Vittal, Jio could end up with 40 mln subscribers by December. If Vittal’s estimate is correct, that would give Jio a market share of over 50% in 4G in India, mainly because of its Welcome Offer.
But if interconnection issues continue, then Jio will be left with no option but to delay the start of its billing and extend the ‘free time’.
And the interconnect problems are far from over as of today. According to the latest data, close to half of the calls made from Jio’s network to Bharti Airtel and Idea Cellular subscribers are failing due to lack of interconnect points, while over 60% are failing to Vodafone’s network.
While Idea and Bharti Airtel have indeed shown some improvement — drop rates have fallen from about 70% to about 50% so far this month — Vodafone’s failure rate continues to remain very high.
If the situation does not improve by the end of this month, Jio will be forced to announce a new scheme involving free calls and data on Dec 3 and extend it to existing users.
The reason for the switch to a new plan on Dec 3 is that the current Welcome Offer cannot be activated after that date. Under India’s telecom rules, any plan which is termed as a ‘promotional plan’ and not a ‘tariff plan’ can be kept open only for 90 days.
However, if the promotional plan promises benefits of 1 year, the benefits can be continued for 1 year. But the plan cannot be offered to new customers after the 90 days are over.
This law, however, does not prevent Jio from offering free services under a new plan. All it has to do is file a new plan ‘Welcome Offer 2’ with the TRAI, with the exact same benefits. This offer can then be given to new subscribers as well as existing subscribers, starting from Dec 4.
This is the primary reason why Jio’s rivals should be worried. If the company introduces one more offer and says ‘data and voice free till March 31’, then the incumbents will see further loss of subscribers from their networks.
Though most media and analysts expect the interconnection delays on the part of the incumbents to continue, industry insiders believe that the matter will be sorted out by the end of this month.
“They cannot afford to have Jio extend the offer.. they are desperately waiting for the (offer) period to end,” said an official with a smaller operator.
Indeed, commenting on the situation, Gopal Vittal, CEO of Bharti Airtel, said his company would be able to start competing with Jio’s tariffs only after the freebie period gets over.
“We will come up with the plans when (Jio) starts charging,” Vittal said recently. Till the company offers its services free of charge, it was not possible to compete with it by tweaking its tariffs, he said in the context of the quarterly results.
Both incumbent companies also indicated that they consider giving interconnection “part of their regulatory obligation” and they do not see interconnection as a “competitive advantage” — all signals that the issue will be sorted out before Dec 3.
Jio too is not keen to keep extending its freebie period for various reasons, including those related to perception and quality of service. By continuing with free offers for a long time, the company risks devaluing its brand. Freebies also tend to affect overall service quality due to the tremendous amount of data generated by it.
If the interconnect issue is sorted out by Dec 3, Jio will offer its ‘Welcome Offer 2’ to only new customers, and not to existing customers who are on its ‘Welcome Offer 1’. If it continues to face problems in connectivity, it will extend the new plan to both new users as well as existing users.