India’s service providers appear to be entering a new phase of competition, with market leader Reliance Jio prioritizing subscriber retention while the country’s second-largest service provider, Bharti Airtel, doubles down on extracting greater value from customers.
Earlier this month, Airtel withdrew several entry-level prepaid plans as part of its premiumization strategy to improve average revenue per user (ARPU). Airtel discontinued its INR299 (US$3.12) prepaid plan, which offered 1GB data for 28 days. The withdrawal of this plan pushes customers toward a INR349 ($3.64) plan that offers 1.5GB of daily data and unlimited 5G for 28 days, raising the entry price for users.
However, Jio seems to have taken the opposite approach. It offers a INR299 ($3.12) tariff, which includes 1.5GB of daily data with 28-day validity. Instead of matching Airtel’s move, it has retained its entry-level prepaid plans while reintroducing Jio Prime membership that effectively protects subscribers from tariff hikes for a year.
India’s third-largest service provider, Vodafone Idea, has also retained its INR299 ($3.12) prepaid plan, which means both Jio and Vodafone Idea offer lower-value entry-level options that Airtel customers no longer have. This creates an opportunity for them to attract Airtel’s price-sensitive prepaid users to their network.
Jio’s affordability focus
Jio reintroduced its Jio Prime membership just a day after Airtel withdrew its entry-level tariff plans. Subscribers of Jio Prime membership can continue recharging their existing prepaid plans until September 5, 2027, regardless of any tariff increases during this period, by paying a one-time membership fee of INR300 ($3.13). The membership also includes priority customer support, early access to new products and services, and cashback vouchers for Jio Home and Jio PC services.
Jio Prime was first introduced in 2017 as a reward for the subscribers who joined Jio network in its initial promotional phase. The reintroduction of Jio Prime now offers some flexibility to Jio to hike tariff since it offers protection to its subscribers till September 2027.
Since its launch in 2016, Jio has maintained that it will offer affordable data to its subscribers, giving free data to its subscribers for the first few months. In September 2016, when Jio launched 4G services, Reliance Industries’ Chairman Mukesh Ambani announced that the initial Welcome Offer would include data at one-tenth of the existing market rates. It was because of affordable data positioning that the company was able to reach 100 million subscribers in less than six months. It is possibly important for Jio to maintain this positioning ahead of its IPO.
On the other hand, Vodafone Idea faces a difficult balancing act. While it needs to improve ARPU, it may be reluctant to withdraw entry-level plans because of the risk of losing subscribers.
Airtel reported an ARPU of INR264 ($2.75) during the June quarter, compared with INR215.8 ($2.25) for Jio and INR177 ($1.84) for Vodafone Idea. This withdrawal of entry-level tariff plans will further help Airtel improve its ARPU. The next few quarters will reveal whether Airtel is able to improve ARPU without losing significant number of subscribers.
