Reliance Jio withdraws Summer Surprise offer: What it means

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Reliance Jio Infocomm (Jio), the fourth generation broadband wireless digital services arm of Reliance Industries Ltd (RIL), said on Thursday evening that it was withdrawing the Summer Surprise offer that it had announced for its customers on March 31, on the Telecom Regulatory Authority of India’s (TRAI) advice.

Jio’s withdrawal of the offer is unlikely to have a major impact on the new telco, which has managed to build a customer base of 72 million people, who have started paying for Jio’s data services from April 1. However, the development will be a significant positive for other telcos who can compete more effectively with Jio to retain their subscriber base.   

On April 1, Jio had announced that it was extending the deadline by which interested customers can enrol for the Jio Prime membership by paying Rs 99 till April 15. Furthermore, Jio had said that subscribers who make the first recharge of Rs 303 by April 15, will get three more months of complimentary services, in addition to the benefits of their purchased plan.

“Today, the Telecom Regulatory Authority of India (TRAI) has advised Jio to withdraw the three months complimentary benefits of Jio Summer Surprise. Jio accepts this decision,” the company said in a statement issued on Thursday evening. “Jio is in the process of fully complying with the regulator’s advice, and will be withdrawing the three months complimentary benefits of Jio Summer Surprise as soon as operationally feasible, over the next few days. However, all customers who have subscribed to the Jio Summer Surprise offer prior to its discontinuation will remain eligible for the offer.”

There are a few things to consider here. Even before Jio announced the Summer Surprise offer, it had managed to convert 60 percent of its free subscriber base to paid users, which according to sector experts is encouraging traction. “This represents a strong conversion ratio, compared to Credit Suisse expectations (30 percent),” said a research note dated April 3 by Credit Suisse.

Second, Jio’s statement that says that it will withdraw the offer “over the next few days” when it is “operationally feasible”, suggests that there is scope for some more subscribers to be added under the Summer Surprise offer.

In some research notes that had been published post the announcement of the Summer Surprise offer on April 1, analysts had pointed out that extending free services to Jio Prime members paying Rs 303 by April 15 could have led to a quarter’s delay in full monetisation to the second quarter of fiscal 2018. Withdrawal of the offer may mean that full monetisation of services happens in the first quarter of fiscal 2017-18 itself.  

With Jio moving to a fully paid regime, albeit with offers of copious amounts of data at attractive prices, the pressure on the financials of incumbent telcos may ease somewhat. With all telcos now regularly charging for services in varying degrees and the financial strain on incumbent telcos expected to ease, the decline in spectrum usage charges levied by the government (telecom-related charges account for around 15 percent of its overall revenue) is also expected to stem.

(Reliance Industries owns Network 18, the publisher of Forbes India.)