Impact of Jio Launch on Industry ARPU (Average Revenue Per User)

Jio launched its services (soft-launch) on 27th Dec 2015 - the eve of 83rd birthday of Late Sri Dhirubhai Ambani. It took almost 9 months for Jio to launch its services commercially on 5th Sep 2016. However during this period it amassed 16 mn subscribers.

Jio continued its subscribers acquisition spree with help of unprecedentedly cheap tariffs which is well supported by a high speed network with robust back haul. This aggressive strategy has adversely impacted others operators at multiple levels. 

Below table highlights change in wireless industry ARPU in last 2 years.

  • Rental Revenue: Revenue earned from voice/data packs (30 mins calling for Rs. 20) and rate cutters (call at 5p/min with recharge of Rs. 35)
  • Revenue from Calls: Revenue earned from main balance by customer calling at a given rate like (Rs.5 earned if a customers calls for 10 min at 50p/min)
  • Revenue from SMS: Revenue earned from SMS sent by customer at a given rate (like 3 SMS sent at Rs.1/SMS). If customers sends SMS after taking a SMS/Combo pack, the revenue is booked under rental revenue. 
  • Revenue from Data: Revenue earned from data packs or data usage on base rate.
  • Revenue from VAS: Revenue earned from Value Added Services like caller tune, horoscope etc. This was primarily a push based revenue rather than pull based (willingly opted by subscribers)
  • Revenue from Outroamers: Revenue earned from roamers latching to a operators network.
  • Net inter operator settlement charges: Terminating operator receives 6p/min(down from 20p/min to 14p/min to 6p/min) for every minute of call from originating operator. e.g. if a Vodafone customer calls Airtel customer for 5 min, Vodafone has to pay 30p (6p/min X 5 min) to Airtel. TRAI excludes this revenue while calculating net ARPU. It also plans to reduce this rate to ZERO by 2019-20.      
On launch of Jio Services, its founder Mr. Mukesh Ambani promised that Jio subscribers will always enjoy unlimited voice calling at any national number free of cost for lifetime.  Keeping this promise, Jio has always launched recharges with unlimited national calling and bundled data. Expectedly it has dented revenue from calls. It dropped from Rs.63 to Rs.19 in 2 years period, the biggest contributor for drop in ARPU.

Since these packs were at steep discount from existing industry recharges, rental revenue remained stagnant at Rs.20- Rs.22 during this period.

Cheap price and bundled data benefits ensured higher adoption of data services. India became world's highest data consuming nation within this short span with increase in data revenue from Rs.28 to Rs.40. However it was not adequate to compensate sharp drop in voice revenue.

Unlimited voice calling resulted in increase in voice consumption. Interconnect income did rise due to this from Rs. 7 to Rs. 15 and hence actual revenue of operators. However TRAI excludes this revenue while calculating ARPU. This revenue is anyway under threat as change in IUC rate to ZERO is almost a foregone conclusion.

Overall level Net ARPU dropped from Rs.121 to Rs.76 (drop of 37%) from Sep'16 to Mar'18. Jio CMS increased to 16% with 187 Mn subscribers during same period. Clearly it has gained exceptionally at the expense of other operators and became a force to reckon with.