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MOSL: TELECOM-RJio’s big-bang VoLTE feature phone launch to expand its target market

​Telecom: RJio’s big-bang VoLTE feature phone launch to expand its target market; Device offerings and ARPU-accretive plans indicate limited market disruption

• In line with its previous strategy, RJio has launched VoLTE feature phone with ARPU-accretive plan at INR153 (unlimited voice and data). This, in our view, may expand the market, but challenge the incumbents to match its value offerings. Key positive for RJio remains its widened target market, from 300m smartphone users to overall 800m unique subscribers.
• We do not expect the launch to cause major industry disruption over the long term. We believe RJio’s VoLTE device offers limited value proposition for voice-only subscribers having current average ARPU of INR70-80.
• RJio’s feature phone launch, however, may attract entry-level data consumers, given the wide pricing gap of ~4x between prevailing feature phone and smartphone ARPUs. Besides this, it may act as a stepping stone for smartphone migration (for 4G usage).
• We believe small operators (which hold majority of the second SIM, deal-hunting users) are at the highest risk of losing subscribers to RJio post the device launch. Larger operators too may see market share risk until they launch VoLTE network, potentially in the next 10-12 months.
• We have revised RJio’s DCF-based value/share to INR260 from INR110 on the back of higher subscriber growth, driving 15%/46% revenue/EBITDA revision in FY19E.