ANALYSIS: Can Reliance Jio avoid increasing 4G data prices?

Jio may not implement a simple re-pricing strategy

On Tuesday night, Reliance Jio — the telecom operator that has made wireless data accessible to crores of Indians for the first time — said it would adopt ‘appropriate increases’ in tariffs over the next few weeks to help generate enough money to fund investments.

The comment came in the wake of similar statements by rival Bharti Airtel and Vodafone Idea.

However, while Bharti Airtel and Vodafone Idea have spoken about increasing tariffs without any caveats, Jio said it would do so in a way that “does not adversely impact data consumption”, which has led to some confusion and speculation among rivals.

According to industry insiders, Jio may adopt a strategy that is significantly different from that of its rivals, seeking to maintain its advantage of scale over rivals even as it tries to generate extra money to invest in 5G and other network expansions.


The company has, from the start, focused on generating more and more money per customer, while its rivals focused on generating more and more money per GB of data or minute of voice.

This meant that Jio was willing to allow customers use more and more data, as long as it also meant that they would spend more and more money.

In other words, the Mukesh Ambani firm would rather have its customer spend Rs 150 per month for 10 GB of data, than Rs 100 per month for 2 GB.

This focus on ARPU, instead of pricing, has differentiated Jio’s strategy from that of its rivals.

The company is able to pursue this strategy because, unlike its rivals, its network was designed from the ground up keeping in mind such an operating model, while rivals’ networks were designed for their low-volume, high-price market strategy.

Faced with such a strategy, rivals like Bharti Airtel, Vodafone and Idea were forced to scrap their business models overnight and commence a massive investment program for their networks to stem the tide of consumers migrating to Jio in search of better value.

These investments — along with the loss of business to Jio — have contributed as much to their financial woes as the levies slapped by the Supreme Court.

Given this context, many industry observers believe that the company may continue to press its scale advantage, instead of simply hiking prices across the board as its rivals seem to be expecting.

Jio, most believe, is likely to continue to rely on the ARPU strategy and generate more revenue from its users by luring them to consume more.

This can be done today by eliminating its low-volume packs, and forcing consumers onto higher packs.

For example, simply eliminating its 1.5GB/day packs and urging users to shift to the 2GB/day plan would increase its ARPU from these users by about Rs 20 per month.

To some extent, such a strategy would help the company maintain its ‘goodwill’ factor with customers, who see it as a champion of affordability that has delivered them from the dark days of data inaccessibility.

On the downside, such a move could increase the utilization levels of Jio’s network and worsen congestion levels in places like Mumbai and Delhi.

Similarly, such a move could also lead to allegations that Jio is continuing with its ‘predatory pricing’ strategy, and lead to pressure on the regulator to ask the company to charge more for data.

Most observers, therefore, expect the company to adopt a hybrid strategy of increasing the data allocation, accompanied by a slight increase in per-GB costs.