Home Broadband Segment Witnessed Limited Investments
Motilal Oswal in its report said that home broadband has “largely been an urban product with low penetration of 7% due to limited network connectivity.” The firm said that the limited availability of home broadband has led to the “increased wireless consumption” across the country due to its simple and “convenient installation” and activation. “This is the classic chicken and egg story – telcos historically have neither invested in network nor increased home passes, given the high gestation period and lower business viability; on the other hand, consumer complaints related to the lack of network/product availability are observed frequently,” Motilal Oswal said in its report. While the home broadband segment in India witnessed “limited investments,” Motilal Oswal said that segment globally is a “well-networked infrastructure” driven by deeper Fiber-to-the-Home (FTTH) penetration “supported by lower FTTH deployment cost” per subscriber. In 2018, Mukesh Ambani, chairman and managing director of Reliance Industries highlighted in the company’s 41st annual general meeting (AGM) that the company is eyeing 50 million homes with its JioFiber service. The 50 million subscriber target was reiterated by Ambani at the 43rd Reliance Industries AGM in July, 2020. “A player of this scale and past record could clearly drive growth in the ecosystem,” Motilal Oswal said in its report. “The RJio target is a massive 2.5x higher than the existing industry subscriber base of 20.5m.” However, the firm said that the subscriber growth may only be “gradual” due to multiple issues such as execution woes, high investment requirements and regulatory hurdles. According to Trai, Reliance Jio has 1.25 million wired broadband users as on August 31, 2020.
Home Broadband Segment Providing opportunities for Big and Small Players
Motilal Oswal highlighted that the wireline broadband segment is “dominated” by telecom operators including state-run Bharat Sanchar Nigam Limited (BSNL) and Bharti Airtel. Further, the firm also said that 20% to 25% are “premium” high average revenue per user (ARPU) subscribers while the rest are currently enrolled on low ARPU plans. The financial services firm also said that Airtel along with “select other players” have stepped up network rollout with the entry of Reliance Jio in the home broadband space. “Nevertheless, the market for even regional players remains buoyant, especially in the recent lockdown, as our channel check suggests there is increased demand for low ARPU conventional home broadband connectivity,” Motilal Oswal said in its report. The firm said that it expects Reliance Jio to “intensify competition” in the wired broadband segment with “lower price point packages and aggressive marketing.” “On the other hand, Bharti could also certainly ride the wave as its product and network capability are at par with RJio and consumer awareness and demand for home broadband solutions are picking up,” Motilal Oswal said in its report.
