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Is Reliance Jio tariff sustainable? Yes, if Oil subsidises Data, says B K Syngal
B K Syngal |  New Delhi |  28 Feb 2017

Reliance Industries Ltd (RIL) share price has gone up by 15.5 per cent in last five trading sessions in NSE since February 21, when the company announced that it would start charging Jio customers. After all, Jio launched services after six years of acquiring spectrum. It is offering free service for seven months after official launch.

However Bharti Airtel chairman Sunil Mittal said at Mobile World Congress in Barcelona that Jio’s existing tariff is not sustainable. Airtel is a competitor of Jio and its Q3 profits fell, thanks to Jio’s strategy of offering services free to subscribers. Hence, i can’t take Mittal’s words at face value.

However, a basic calculation shows that Jio’s tariff is not sustainable.

The company claims that it has a subscriber base of 10 crore. Let us assume that all of them get converted to paid customers.

Currently, Reliance Jio is offering two tariff packs – One, Rs 149 per month and another Rs 303 per month. Let us assume a blended tariff of Rs 240 per month.

Hence, Reliance Jio’s revenue will be Rs 2,400 crore per month. Out of this nearly 33% goes directly to the government in form of various taxes. Hence Jio’s real earning will be Rs 1,600 crore per month.

Reliance Jio claims that it has invested Rs 1.5 lakh crore in the company. Moreover, it has kept another Rs 30,000 crore for further investment. Therefore, servicing cost of its investment would be a minimum of Rs 2,500 crore for the remaining 13 years of spectrum.

Hence, Reliance Jio will not be able to meet even its investment cost as of now. I am not considering Opex and sustained capital investment.

This is no-brainer that the existing tariff of Reliance Jio is completely unsustainable business proposition.

I am very liberal in my calculations and even a subscriber base of 20 crore with other parameters remaining same will not make these tariff sustainable. Only Oil can save Jio.

(The writer is a well known telecom expert and a former CMD, VSNL)

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28 Feb 2017(IST)  
This is totally irrelevant. If customers are being benefited with the free services then it should not be a problem.
Posted By :- Rajan S
It is a serious issue friend. Such offerings are not good for the health of telecom sector. Infact, telecom commission agrees to this.
Posted By :- S D Singh
Sir who are we to judge the viability or feasibility. when nano announced we said unprofitable. when HFCL quoted 85,000 crores we said not workable..when akash said tablet for Rs 2500..we said not workable..when china started selling phones for 1,000 Rs..we said non workable. even today karol bagh sells phone for Rs 500..but experts like us will not believe. we the experts see thinbgs form our angle..we know free yahoo,goggle, whats app are working ok, but in losses..that does not go well with us as experts.
Posted By :- Prof NK Goyal
Dear Shri Goyal with due respect, let us stay on the economics of the case and not rhetoric of past. HFCL is a very bad example. Did it fly, NO? Our duty is to alert those concerned to prevent the industry overall not to be at risk. Challenge me on facts not on rhetoric, that to with HFCL example please. Regards, syngal
Posted By :- BK Syngal
Syngal sir. agreed. who in this world can say anything to you. You are undisputed leader. Having said that are we not lost in the country. If some one starts making some service free and he is acting foolish..what we do..we debar him to provide. people give free food in guirdawara and lungaars..what profit. You can again say rhetoric..Can we challenge google, yahoo, linikedin, whats app on facts..they are also giving free and earning a lot and they sell after some time for billions. Is there a law that I can not do some business not to earn profit but to make losses. I respet your vies and would like to close agaian by syng I agree wioth you. Who am I to agree or not agree. You r right. If I say I do not agreed with Sun..this does not matter. Sun remains sun
Posted By :- NK Goyal
Jio has shaken the backbone of telecom industry with such aggressive plans. This might be the start of the downfall of Telecom sector. Play fair Mr. Ambani.
Posted By :- A Gupta
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