A recent report suggests that more than 60% of Idea Cellular subscribers have completely stopped using its data services after Reliance Jio made its entry to the Indian telecom space – one more example of the ‘Jio effect’ on the Indian telecom space.
Its now no secret that Reliance Jio had had a hammering effect on the incumbents, and that too from all aspects, be it usage or revenue, and then, impacting the overall market share. While Jio made a big dent on incumbents’s revenues by offering free voice calls, which has been the mainstay of the incumbents’ revenue – a whooping 70%, the new operator has also affected the data revenues of the oldies and biggies by a significant margin.
A study by UBS found that 33-61% of users have completely stopped their data usage on incumbents networks after they subscribed to Jio.
“The biggest hit is taken by Idea at 61% whereas Airtel as 33% comes out much better,” mentions the recently releassed report by UBS.
Besides these 33-61% who have completely stopped their data usage, another 26-41% of users have reduced their data usage on their respective networks.
On voice front also, Idea Cellular has been the worst hit. Around 33% of Idea Cellular users have stopped making a voice call on its network since Jio started offering its services whereas the ratio is comparatively lower for Bharti airtel, at 15%.
The report, however, suggests that the Jio effect on incumbents’ voice usage is manageable.
The Aditya Birla Group operator, fortunately, knows this figures and acknowledges the implications of the new operator and its free offer in India’s highly competitive market.
The company’s Q3 financial results is a telling testimony of Jio’s impact. What it witnessed in Q3, 2016 has not happened in the last 10 years for the Aditya Birla Group run operator. Even in its own terms, Idea Cellular admits the company’s revenue has dropped to an unforeseen level.
The company posted revenues of Rs 8663 crore in Q3 2017 compared to Rs 9300 crore in the previous quarter showing a dip of 6.9% sequentially. This dip was seen across it operating circles.
More shocking is, Idea posted a loss of Rs 386 crore in this quarter compared to a profit of Rs 90 crore in Q2. On a standalone basis too, the firm posted loss of Rs 479 crore compared to a profit of Rs 4 crore. This had never happened since 2007 when the company went public.
The company attributed this negative development to Jio effect, of course without exclusively naming it but referring it to as a new operator.