After Mobile, Reliance Jio, Bharti Airtel Now Unleash A Tariff War In Broadband

Billionaire Mukesh Ambani’s telecom unit had announced new tariff plans for fixed broadband connections last week, starting at Rs 399 plus taxes per month for 30 megabits per second speed for unlimited broadband consumption, from Rs 699 previously, according to a company release.

Bharti Airtel Ltd. on Sunday responded by lowering its base tariff to Rs 499 plus taxes per month for 40 Mbps speed for unlimited broadband consumption, from Rs 799 earlier.

In doing so, Jio Fiber and Bharti Airtel have ensured that their tariffs are on a par with those offered by state-run Mahanagar Telephone Nigam Ltd. and Bharat Sanchar Nigam Ltd., which start at monthly rentals of Rs 300-500. Reliance Jio and Bharti Airtel are also offering unlimited data use from their base plans itself.

Reliance Jio has tweaked its mid-range and higher-end broadband plans by increasing tariffs by 15-18% to Rs 999 and Rs 1,499, respectively. Higher price plans, however, are accompanied by increased access speeds and bundled subscription to over-the-top apps.

While Bharti Airtel’s broadband base plans are priced at almost 25% premium to that of Reliance Jio’s, the Sunil Mittal-led carrier is offering higher speed at the Rs 999 price point compared to Ambani's unit.

Ambani's telecom unit is allowing subscription to key OTT apps at higher-priced plans, up to 12 in some cases, including Netflix, Amazon Prime, Disney Hotstar, among others; and 30-day free trials for new users, including offering free subscription for 10 OTT apps, except Amazon Prime and Netflix which comes with Rs 999 plan and above.

In the last few years, Bharti Airtel had reduced content bundling with Netflix and Disney+ Hotstar no longer available to broadband customers. But as competition hots up, it has brought back OTT bundling with ZEE5, Disney+ Hotstar and Amazon Prime from the Rs 999 price point. It still doesn't offer Netflix. Reliance Jio, however, is offering Netflix at Rs 1,499 price plan.

"Fixed broadband penetration is currently at 6-7% in India, while we estimate the size of addressable market at 20-60% of households, pointing towards a potential 2-5x expansion in subscriber base over the next three to five years," Amit Rustagi and Navin Killa, analysts at UBS, wrote in a recent note.

Saurabh Handa of Citi Research agreed. India has the lowest fixed broadband penetration in Asia at 7% of the households, or around 19 million. He expects the addressable market that can potentially afford broadband could be 24% of the total household or 72 million, but this is anchored at an average revenue per user of Rs 750 per month.

India had 22.39 million wired (broadband and narrow band) internet subscribers out of total internet subscriber base of 661.94 million, according to data from Telecom Regulatory Authority of India. BSNL has 51.75% market share with 11.59 million subscribers followed by Bharti Airtel at 2.42 million.

Ambani is targeting 50 million users for Jio’s fibre-to-the-home services through which it plans to offer broadband, telephone, TV content and internet-of-things services.

In comparison, Bharti Airtel has 2.5 million fiber internet connections in its home segment, contributing about 5% of its India earnings before interest, tax, depreciation and amortisation. Its average revenue per user has remained steady at around Rs 800 despite Reliance Jio’s entry last year. Bharti Airtel has also started partnering local cable operators to address last-mile access challenges though its presence is limited to 110 cities compared to Reliance Jio’s 1,600.

Handa of Citi Research said Reliance Jio is attempting to capitalise on the post-Covid environment as traction over the last year has been relatively modest at around 1 million households, he wrote in a report, adding it may now be looking to change this by significantly lowering the entry level price point.