Today, India is in the middle of a major technological revolution. The most recent development to join this technology revolution has been the launch of 5G networks by Reliance Jio, India’s leading telecom service provider. This has not only created a new level of competition for incumbents such as Airtel and Vodafone-Idea. But it also poses a threat to their profit growth in the long run. In this blog, we will look at how the launch of 5G networks by Jio could hinder Airtel’s profitability growth according to an analysis by JP Morgan.
Jio’s 5G Launch
An Overview Reliance Jio launched its 5G networks on April 12, 2021. It is the first Indian company to roll out 5G services in India and it plans to expand its network over the next few years. The company claims that its 5G services will be 10 times faster than 4G. It will allow customers to experience better internet speeds, enhanced gaming experiences, and improved video streaming capabilities.
Reliance Jio has also announced that it will offer its services at competitive prices when compared to other incumbent telecom companies. The Threat posed by Jio 5G Launch on Airtel’s Profitability Growth According to JP Morgan’s analysis. The launch of 5G networks by Reliance Jio could significantly affect Airtel’s profitability growth in the long term, as it could lead to an increase in market competition and customer churn from the Airtel subscriber base.
Moreover, JP Morgan estimates that Airtel’s profits could buy up to 10% due to lower average revenue per user (ARPU) over time if the customer shifts towards Jio’s cheaper offerings since its customers have already adopted lower tariff plans concerning 4G services.
Due to increased competition from Jio’s 5G services, it may force Airtel to offer cheaper tariffs and discounts, which would lead to further reducing their profits. With the launch of Jio’s 5G network, they expect data costs to come down further, making it difficult for telecom operators like Airtel who are higher ARPUS for generating revenues.
Conclusion
While no doubt that Reliance Jio’s launch of its 5G networks is a significant development for India, technologically speaking. It may pose a serious threat to profit growth for telecom service providers, such as Airtel, according to JP Morgan’s analysis. Airtel needs to devise innovative strategies and adopt new technologies quickly if they wish to remain competitive in the face of fierce competition from Jio’s low-cost offerings.
