*Jio launches aggressive postpaid plans - Negative for Bharti/VIL*
* Jio has launched new postpaid plans with free subscription to Netflix, Amazon Prime and Hotstar for Rs 399 (1 connection), Rs 599 (2 connections), Rs 799 (3 connections) etc
* Postpaid segment account for ~5% of base but 15-20% of revenue and higher share of profits. *This was one segment of incumbents where Jio had not been able to make dent.*
* *Jio was unable to gain the postpaid subs and churn competition subscriber to itself.*
* *We expect two things to happen* (1) Bharti/VIL may also come up with similar plans. This will have some impact on their profitability in short term. If they fail to come up with similar plans, churn of subscribers to Jio is likely and thus negative. (2) Overall pie of postpaid subscriber base of industry most likely may increase. *This will help to boost ARPU. These would be positive for all telcos.*
* *Earnings impact:* On ~14.6/21mn postpaid subs for Bharti/VIL each with ~Rs 400/ARPU, assuming churn (5%) of 0.7/1mn subs and 10% ARPU decline for rest; both Bharti/VIL would lose ~Rs 800mn/1.2bn pm or Rs 10/14bn in revenue pa. EBITDA impact of ~Rs8/11bn viz. ~2% for Bharti, ~10-15% for VIL. These could be off-set by ~2mn new postpaid subscriber additions.
* *In short-term we expect the development to be sentimentally negative for Bharti/VIL.*
* *Larger question is JIo willing to move up the price table for larger prepaid segment or drive growth through its innovative product offerings alongwith impacting profitable segments of incumbents.*
Regards, Himanshu Shah
Analyst, Dolat Capital