Reliance Jio crosses 100 million customer mark, winding up of freebies lifts RIL shares to 8-year high.

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image courtesy : The Unbiased Blog

As the concerns over customer retention post the start of paid services beginning April mar the celebration of Reliance Jio’s 100 million subscriber base,the shares of its parent company Reliance Industries saluted the prospect of fresh cash inflows,hitting an eight -year high.

Reliance Industries shares skyrocketed and were trading up 7.05% at Rs 1,165, close to the day’s high of Rs 1,170.5, contributing to almost the entire gain in the benchmark indices.

On Wednesday, shares of Reliance Industries shot up over 10.14 per cent to hit an eight-year high of Rs 1,198.60 on BSE, adding about Rs 35,000 crore to the market capitalisation. This was the biggest intraday gains for the stock since May 16, 2014.

Reliance Industries investors took the announcement positively, as they had been keenly awaiting for cash flow from the multi-billion-dollar telecom venture. The move will also ease pressure on RJio’s peers.

In a note, Credit Suisse said it would now be interesting to see how Reliance Jio manages the transition to paid usage, without seeing a sharp drop in subscriber base.

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“The next 30 days would probably be used to gauge the shift to these new price points and to market these to existing subscribers,” the brokerage said.

Jal Irani, Senior VP at Edelweiss Capital Services, said he sees significantly greater upside from here for the shares of Reliance Industries, triggered by the commercialisation of Reliance Jio at a very healthy price point. “Reliance Industries stock is just breaking out. This is just the beginning,” Irani said in an interview.

ICICI Securities expects Jio’s total usage and tempo of subscriber addition to slow down with the end of free usage period.We expect RJIO to maintain lower-than-incumbents prices. This is likely to lead to further pressure on realisation and subscriber acquisition costs. We will watch for stabilisation in gross subscriber addition in industry and churn ratio of incumbent operators as proxy for competitive intensity,” it said.

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Reliance Jio Chairman Mukesh Ambani  on Tuesday announced a slew of offers, including 20 per cent more data than any rival from April. It will continue to offer free voice calls and national roaming post April 1, when its promotional free voice and data offer ends.

“For 170 days, Jio has added on average nearly 7 customers on its network every single second of every single day. This is an unprecedented level of acceptance for any technology company anywhere in the world,” he said.

For the existing 100 million users, he announced a Jio Prime Membership programme wherein customers can enrol by paying one-time fee of Rs 99 and continue to get the existing benefits till March 2019 at “a rock-bottom introductory price of only Rs 303 per month.”By contrast, market leader Bharti Airtel offers unlimited calls and 1GB 4G data at Rs 345 for 28 days.

With 200 crore minutes of voice and video calls, more than 100 crore GB or 3.3 crore GB a day of data has been consumed on the Jio network, making India the number one country in the world for mobile data usage, he said. Data usage on Jio almost matches the usage in US and nearly half more than all of China.

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Meanwhile, the telecom industry congratulated the company on the achievement and said the commencement of paid services on the network will bring to light “consumer choice and preference”.

“We congratulate RJio for reaching the 100 million subscriber mark in a record period of six months and becoming the largest global data network,” Rajan S Mathews, Director General, Cellular Operators Association of India (COAI) was quoted as saying in a statement.

“The industry is pleased to see the commencement of paid services as the market place will now become the place where consumer choice and preference will be revealed,” Mathews said.