A 4G Free-for-All

Vodafone India Counters Jio with a Daily Deal

Reliance Jio is a newcomer to the Indian mobile market, but the operator has had a most amazing first year. After only three quarters, Jio grew its subscriber total to 110 million. The secret to this growth isn’t a mystery: the operator had initially been giving away its 4G services and selling low-cost smartphones to an audience eager to get connected.

Now Vodafone, currently the second-largest wireless operator in India, is responding to Jio’s keen 4G offers with special daily and weekly prepaid deals, allowing customers to jump into and out of 4G access as desired. Vodafone’s SuperDay plan provides users with 100 MB of 4G data and unlimited local and long-distance calls for a day for 19 rupees (about $0.29). Its SuperWeek deal offers 250 MB of 4G data and unlimited local and long-distance calling for 49 rupees (about $0.76).

Jio offers very similar deals: a daily plan that includes 100 MB of LTE data and unlimited calling for 19 rupees. Its seven-day plan costs 96 rupees (about $1.49), but includes 600 MB of data as well as unlimited calls.

There’s no doubt that LTE is where the growth potential is: the market has gone from 5 million LTE subscribers in 2016 to nearly 130 million currently, mainly thanks to Jio’s rapid ascent. The operator now has about 85 percent of India’s 4G customers. India is still a 2G country with about 70 percent of mobile subscribers relying primarily on GSM networks.

Jio has grabbed data-hungry customers. It offers 4G smartphones starting at 5,499 rupees (about $85) and a 4G mobile hot spot for 1,999 rupees (about $31). These days, it’s easy enough for many people in India to become mobile broadband users. It’s also easy enough for Vodafone to jump in and compete on pricing. The larger challenge will be its LTE network build-out.

According to GSMA Intelligence, Jio’s LTE network now covers 77 percent of India’s population. Vodafone’s LTE coverage in India is 8 percent, although its impending merger with Idea Cellular could expand this to about 30 percent. Vodafone needs to build out its LTE services in India while it’s running 2G and 3G networks. Jio, meanwhile, can concentrate on gaining 4G subscribers.

The current price-war feels unsustainable, and, as history has shown, market tariffs will edge higher as the current impact on operators’ profits is severe. The latest moves to consolidate should help drive the expected recovery of market pricing in the long run. Vodafone, Airtel and other incumbent operators in India are opposing a new but well-funded mobile network with a goal of becoming a top-five global telecom company.

We had predicted a price-war after Jio’s entry into the Indian market (see Reliance Jio Crosses a Mega Milestone). The annual revenue of Indian telecom companies has also dropped for the first time since 2008.

Telecom operators in India have been lowering prices since Jio’s entry caused an upheaval in the market with its free 4G data plan. Any new plans by Vodafone and Airtel offering additional data and calling benefits, should be viewed as a way to stay relevant. To counter the “Jio effect”, the market has seen a series of consolidation moves, including deals between Vodafone and Idea Cellular, Airtel and Telenor India, as well as Reliance Communications and Aircel. Until Jio’s arrival, it was the telecom operators calling the shots. The entry of Jio has created a win-win situation for customers with prices being slashed.