Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Telecom: Thoughts on Jio's latest price cut - Kotak

Posted On: 2018-01-09 04:23:51

Thoughts on Jio's latest price cut. A moment of truth every 84 days! That's what Jio faces given that a bulk of its customers haven't given up their incumbents' connection yet. Jio is always exposed to the risk of losing the next recharge. To that extent, we are not sure how to read the latest 'price cut' move by Jio after the last two '84-day interval price moves' were increases. Does it indicate that 'recharge leakage' is running ahead of Jio's threshold? Perhaps. Interestingly, Bharti and Idea have responded to Jio's move within a day; no longer reluctant. Interesting times, as always!

Media reports suggest a price cut by R-Jio; prices of popular plans back to July 2017 levels

Unauthenticated media reports suggest that Jio's latest price move involves – (a) cut in the popular 1 GB/day plans to July 2017 levels, reversing the increase announced in October 2017, and (2) introduction of new 1.5 GB/day plans. Exhibit 1 has the details. We say unauthenticated because we haven't seen a press release from Jio or RIL in this regard yet. The new plans do not show up on Jio's website or the plans section of your scribe's 'my Jio' app, either. That said, Bharti's website shows an increase in the validity of a couple of plans (the erstwhile 70-day and 84-day 1 GB/day plans now carry a validity of 82 days and 91 days, respectively). This, we believe, is an indication that the media reports are perhaps right. Media reports also indicate that Jio's new plans would be effective January 9, 2018; this is exactly an 84-day interval from the date of Jio's last pricing move (October 18, 2017).

Read-through of the move not straight-forward; has 'recharge leakage' for Jio increased?

Even as a simplistic read-through of Jio's move is that this is another 'who's the boss' move from Jio, we would refrain from restricting ourselves to this view. Notice the subtle difference between Jio's moves post the July 2017 price increase and the October 2017 price increase. Jio's October 2017 price increase was preceded by a supposedly 'one-week only' 'triple cashback' offer (link). This offer has since been extended multiple times and continues to run even today. We do not see a reason why Jio should have kept the triple cashback offer running if the recharge momentum was healthy and above whatever threshold Jio has set for recharge stickiness.

Recharge stickiness is important for Jio as it hasn't yet successfully crossed the bridge as far as becoming the primary incoming number of most of its customers yet. This exposes Jio to the risk of losing the next recharge especially given that incumbents have closed the pricing gap versus Jio quite aggressively in the past few months and continue to enhance their LTE network coverage and capacity. A moment of truth for Jio every 84 days, in other words; Jio's response is perhaps an indicator of how the latest moment of truth shaped up. We must note that this thesis of ours is just a conjecture. Our reading of the December 2017 quarter performance of Jio and the incumbents is that Jio's recharge momentum has been fairly strong. Hence, we do not see the rationale behind Jio's latest pricing move. Scope for incremental revenue gains from a price cut looks limited given that Jio already has the lion's share of the market's LTE subscribers.

Interesting immediate response from Bharti and Idea

Incumbents have been slow, reluctant and selective in their response to Jio's pricing moves thus far. This is the first time that the response appears swift. Bharti's response, increase in validity of the two most popular bundled plans, is visible on its website while press reports indicate a similar response from Idea (not visible on their website yet). While clearly ARPU dilutive, the response clearly suggests that incumbents are now a lot more confident of their LTE network. Also, the incumbents increasingly have much less to lose by responding aggressively, we believe. Defend or perish, it is.

Our view on Bharti and Idea remains unchanged; ours is a medium term call and never baked in a straight-line up-move in pricing.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Initiating Coverage: HSIL Ltd - Angel Broking
Result Update: The Phoenix Mills Ltd - BUY - TP Rs.672 - Kotak
Result Update: Time Technoplast Ltd - BUY - TP Rs.214 - Kotak
Result Update: Shipping Corporation of India - BUY - TP Rs.110 - Kotak
Result Update: PNC Infratech Ltd - BUY - TP Rs.208 - Kotak
Result Update: KNR Constructions Ltd - ACCUMULATE - TP Rs.348 - Kotak
Result Update: NBCC (India) Ltd - ACCUMULATE - TP Rs.229 - Kotak
Result Update: Jindal Stainless Hisar Ltd - BUY - TP Rs.318 - Kotak
Result Update: NMDC Ltd - SELL - TP Rs.130 - Kotak
Result Update: Talbros Automotive Ltd - BUY - TP Rs.389 - Kotak
Result Update: Sterling Tools Ltd - ACCUMULATE - TP Rs.428 - Kotak
Result Update: FIEM Industries Ltd - BUY - TP Rs.1203 - Kotak
Management Meet Update: Escorts Ltd - BUY - TP Rs.1051 - Kotak
Result Update: GE Shipping Company - BUY - TP Rs.500 - Kotak
Result Update: Marico Ltd - ACCUMULATE - TP Rs.327 - Kotak
Result Update: Mahanagar Gas Ltd - ACCUMULATE - TP Rs.1084 - Kotak
Result Update: Wonderla Holidays Ltd - BUY - TP Rs.457 - Kotak
Result Update: Asian Granito India Ltd - BUY - TP Rs.705 - Kotak
Result Update: NALCO - BUY - TP Rs.100 - Kotak
Result Update: VA Tech Wabag Ltd - BUY - TP Rs.672 - Kotak
Result Update: Greaves Cotton Ltd - REDUCE - TP Rs.136 - Kotak
PNB's 11300 cr fraud will impact the asset quality: Angel Broking
Lambodhara Textiles Ltd Q3 net profit climbs to Rs. 3.46 crores
Result Update: GHCL Ltd - BUY - TP Rs.365 - Kotak
CHHOTA (to) Mota Ideas - Result Update: Eveready Industries India Ltd - BUY - TP Rs.530 - Kotak
Result Update: Tata Motors - BUY - TP Rs.477 - Kotak
Result Update: Bajaj Auto Ltd - BUY - TP Rs.3670 - Kotak
Views on Indoco Remedies Ltd 3QFY2018: Angel Broking
Government finally lays out a detailed roadmap for PSU banks: Angel Broking
Idea Cellular feels the pressure of Jio pricing in Q3: Angel Broking
Company Update: GHCL - BUY - TP Rs.365 - Kotak
Result Update: Zee Entertainment Exterprises Ltd - REDUCE - TP Rs.610 - Kotak
Result Update: Hindustan Unilever Ltd - ACCUMULATE - TP Rs.1520 - Kotak
Result Update: TV18 Broadcast Ltd - ACCUMULATE - TP Rs.67 - Kotak
Views on Wipro Limited 3QFY2018: Angel Broking
Yes Bank reports better than expected quarterly results: Angel Broking
Result Update: DB Corp Ltd - BUY - TP Rs.550 - Kotak
Result Update: Adani Port and Special Economic Zone (APZ) - BUY - TP Rs.485 - Kotak
Result Update: Ultratech Cements Ltd - BUY - TP Rs.4978 - Kotak
Views on HCL Technologies Ltd 3QFY2018: Angel Broking
MIRC Electronics - Initiating Coverage - Kotak
Result Update: Tata Sponge Iron Ltd - REDUCE - TP Rs.1172 - Kotak
Result Update: Hindustan Zinc Ltd - REDUCE - TP Rs.315 - Kotak
Result Update: Zensar Technologies - ACCUMULATE - TP Rs.971 - Kotak
Result Update: Cyient Ltd - REDUCE - TP Rs.689 - Kotak
Result Update: NIIT Technologies Ltd - ACCUMULATE - TP Rs.798 - Kotak
Result Update: Chennai Petroleum Corporation Ltd - ACCUMULATE - TP Rs.495 - Kotak
Result Update: ITC Ltd - BUY - TP Rs.318 - Kotak
Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.600 - Kotak
Axis Bank flatters the street in the third quarter: Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018