Reliance Jio to aggressively gain MSME subscribers
As per a report by BofA Securities, Jio is looking to replicate mobile traction on MSME front. "Amongst the 50 million MSME, we consider 15-20 million to be the addressable market for this offering currently. Over time with rising GDP/capital and recent focus on the government's "Make in India" initiative we expect room for the addressable market to expand," the report said.
"By offering a bundled connectivity plan at 1/10th the existing price (Rs 15-20K/month) in the market, Jio is looking to expand the addressable market," it added.
"We note that the current SME market is underserved with cos like Tata Teleservices, Bharti focusing more on the larger enterprises. In our view these offers don't have much impact on competitors like Bharti as no players address this market effectively. One of the reasons the SME market is underserved is because these merchants are notoriously difficult to monetize and are a very price sensitive base," it said.
On the positive front, Covid has accelerated the digital adoption by these merchants and they are more open to digitizing their business. "We expect the traction to be gradual from this offering & don't expect it to contribute meaningfully to RIL's consolidated revenue/EBITDA," the report added.
RIL's subsidiary Jio introduced an integrated offering for micro, SMBs providing enterprise grade fiber connectivity, digital and devices that enable leading digital solutions. The packs offer affordable entry points starting as low as Rs 900 and are tiered up to Rs 10K.
In addition to Microsoft's suite of services including MS 365 and MS Teams, Jio is also offering in-house digital solutions like JioAttendance, JioMeet tools at no additional cost.
UBS said in a report that while Jio claims the starting plan of Rs 901/month is one-tenth of existing price in the market, it is tough to make comparisons given the existing products are not standard.
"We have currently built-in 3 million MSMB fiber subs in FY22E increasing to 7.5mn subs in FY25E, with segment ARPU in the range of Rs 1,100-1,200/month," it said.
The newly launched ARPUs are in the range of our estimates, and hence supportive of our DCF valuation of Jio. Differentiated offerings could drive faster adoption The solutions are spread across offerings related to connectivity (such as unlimited fiber broadband and voice, fixed mobile convergence, and static IP); digital solutions (including Microsoft365 with Office Apps, Outlook Email, One Drive, Teams, Jio Attendance, JioOnline, JioMeet, and Microsoft Teams); and lastly device-as-a-service and special device offers (from Reliance Digital), under seven different tariff plans.
Integrated ready-to-use offerings, assisted sales and onboarding, and digital account management could enable Jio to aggressively gain MSMB subs, like they did in mobility and home broadband segments.
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