India Reliance Jio, the telecom giant that shook the mobile market of the country by offering data at incredibly low prices, is publically planning a price bomb that will raise its mobile recharge plans by a flat charge of 65 across the board. It is an unprecedented move that is expected to be formally announced within the next several days that will see Jio increase its lowest price point not only to the current one of ₹365 but also to a new minimum of 365, which will essentially change the competitive environment of the Indian fiercely competitive telecom industry. The move, which is whispered through the industry circles and is currently gaining momentum, is an indication of a strategic reversal of Jio towards maximization of profits, at the expense of losing a section of its enormous, price-sensitive subscriber base.
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The telecom industry sources believe that the enormous price increment is a calculated reaction to growing pressure to enhance the Average Revenue Per User (ARPU) and improve the financial results before possibly future investments in 5G infrastructure. Jio has over the years led a vicious price battle and reduced tariffs to unsustainable levels and has pushed its competitors into merger. Today, having already a huge market share that is well established, it might seem that the company is ready to use its power which means that the days of fierce pricing and razor-thin margins could finally come to an end of the industry giant. The increment of 65 is not a minor adjustment and is quite a statement of purpose.
It is also likely to have a significant immediate implication on consumers. Jio will have to substantially increase the monthly expense of millions of subscribers who count on the affordable packages of Jio in their daily communication and data interactions. Although other telecom operators have already started other smaller, gradual price increases in the recent past, Jio flat 65 increment establishes a new precedent of aggressiveness and therefore is likely to precipitate other telecom operators into either making price increases too or face a risk of losing market share on the basis of price only. This action may have a domino effect on the industry-wide tariff revision, with operators trying to equalize their books in a post-pandemic economy.
This massive overhaul of the tariff by Jio will ultimately see if its vast number of subscribers is loyal or not. Most of them will complain, but the perceived higher quality of the network and large 5G coverage might help prevent a large amount of churn, particularly once the competitors catch up or even surpass the new prices. But in a country where rupees matter, a 65 point increase, i.e. a major percentage point increase on the lower-end schemes, is a lot to demand. The following few weeks will determine either the success or failure of Jio in its highly calculated bet on profitability, or it may also end up creating an additional avenue of competition in the dynamic Indian telecom market.
