Mukesh Ambani starts another tariff war with Jio Fiber's rock-bottom tariffs
- A new price war may emerge in the broadband sector with Jio Fiber’s aggressive pricing of its broadband subscriptions.
- A similar price war triggered when Reliance Jio entered the market in 2016 with rock bottom pricing of mobile data plans.
- The competitive intensity in the broadband sector will increase as major players to fight to hold on to customers as the price war shifts, according to a report by Elara Capital.
At half the price, the company's introduced a new top-up that only costs ₹350 per month and offers 50GB at speeds of 10MBPS, which will cut to 1MBPS after fair usage policy (FUP).
Similarly, when Jio entered the market back in 2016, data became cheaper than ever before. But, it was not without its pitfalls.
The move also pushed out most of the competition in the market. And now, major players in the market — Reliance Jio, Bharti Airtel and Vodafone Idea — are fighting to recover losses as their debt continues to rise.
With the way Jio Fiber’s pricing its products so far — it looks like there might be another price war on the horizon.
The makings of a price war
When data prices on mobile fell, it brought more people online. But, after three years of racking up debt, telecom operators are hiking their prices back up by as much as 40%.
They have also asked the Telecom Regulatory Authority of India (TRAI) to set up a floor price for data services in order to regulate tariffs because the price war has gotten so intense that no operator will voluntarily correct their prices.
Meanwhile, smaller players that couldn’t survive the competition were either shut down or acquired by one of the major players. No new company could enter the market since it was unviable to offer the same prices as the telco giants.
Now, Jio’s employing the same strategy to the broadband sector.
“We expect the competitive intensity to rise as incentives including free content, could increase, especially from, to achieve the targeted customer base,” according to Elara Capital.
Small local players, like YouBroadband and ACT Fibernet, could be forced out of the market as Jio’s squeezes on margins. Larger players, like Vodafone Idea and Bharti Airtel, will have to defend their market share while also trying to grow. And government players, which include BSNL and MTNL, will struggle with their already troubled profits.
“While telecom firm’s contemplating mobile tariff hike was encouraging, the price seems to be shifting to FTTH [Fiber To The Home] market and could pressure margin,” stated Elara Capital’s report.
Others believe Jio Fiber’s broadband won’t be disruptive asserting that other operators offer higher value on a per GB basis.
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