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Analysts see limited impact of JioPhone 2021 on Bharti Airtel, Voda Idea

Reliance Jio’s new bundled offer – JioPhone 2021 – giving customers a handset, up to two years of unlimited voice calls, and 2 GB data per month for one-time payment of Rs 1,999 may not be enough to scare completion, feel analysts. A one-year plan from RJio with similar benefits is available for Rs 1,499. For existing users, the plan is priced at Rs749 with one year validity, with similar voice and data allowance.

Jio’s aggressive efforts earlier, according to analysts at Emkay, to capture post-paid subscribers from Bharti and Vodafone Idea Limited (VIL) have not worked well despite multiple attempts. Based on their estimates, RJio has around 130 million JioPhone users, and among them over 40 million will complete the three-year lock-in period in the first half of 2021 (H1CY21).

“Significant moderation in subscriber additions in the last few months, inability to make any major headway in the post-paid market despite aggressive efforts made in September 2020, free voice calls across networks as a result of zero interconnect usage charge (IUC), delay in launching low-cost 5G smartphone; fear of losing current JioPhone users whose three-year security deposit payback scheme coming to an end are the key reasons for Jio’s renewed aggression in these offerings targeting bottom-of-the-pyramid subscribers,” wrote Naval Seth and Sonali Shah of Emkay Global in a February 28 note.

Meanwhile, those at Jefferies believe RJio's primary focus is still on gaining subscribers, which dampens expectations of tariff hikes going ahead. That said, Bharti has been able to retain subscribers over time.

Since their launch in 2017, JioPhones have gained only a 22 per cent market share despite being sold at a 40 per cent discount to the average selling price of feature-phones in India, reports suggest. In the voice segment, analysts at Jefferies said, Bharti's unlimited voice plan costs twice RJio's cheapest Rs 75 plan. Besides, Bharti's limited voice plans are offered at lower price points of Rs 49-79.

“Despite the steep tariff premium, Bharti has retained subscribers due to its offerings at lower price points and no requirement for a device change. Jio's new plans might not entice existing 2G users on Rs 49 plan, but they could drive churn among feature-phone users changing their device,” wrote Akshat Agarwal and Ankur Pant of Jefferies in a February 28 note.

Paying the upfront amount demanded by RJio now will be another challenge as the subscribers being targeted by the company had already purchased JioPhones in the past two years when the upfront cost was cut to Rs 699 from Rs 1,500.

“The higher upfront payment required for the bundled device offer may be a key deterrent for the customer segment being targeted by JioPhone incrementally, even as it provides a meaningfully attractive value proposition in terms of unlimited voice and reasonable quota of high-speed data covering basic requirements on a superior 4G device compared to the feature phones in use,” said Tarun Lakhotia and Aniket Sethi of Kotak Institutional Equities in a March 01 note.

Among the lot, analysts still remain bullish on the road ahead for Bharti Airtel and have a buy / hold rating on the stock with a 12-month target price ranging between Rs 600 - Rs 713, indicating an upside between 13 per cent - 35 per cent from the current levels.

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