Trai forces Reliance Jio to withdraw Summer Surprise offer

18 Oct 2017 11:09 AM


MUMBAI: The telecom regulator ordered Reliance Jio Infocomm to withdraw its Summer Surprise plan that offered three months of free services to a user who paid an initial fee by April 15, dealing a setback to the newcomer's bid to rapidly add to its subscriber base.

The move by the Telecom Regulatory Authority of India (Trai), which came after a meeting with Jio officials earlier on Thursday, will give relief to rivals such as Bharti Airtel, Vodafone India and Idea Cellular. They have been struggling under the onslaught of Jio's two successive free offers, and the development should help restore pricing rationality over the next few months, experts said.

"Today, Trai has advised Jio to withdraw the three months complimentary benefits of Jio Summer Surprise," the company said in a release on Thursday.

The Mukesh Ambani-owned telecom company added that it accepted the decision. From now on users will need to subscribe to its previously announced monthly paid plans, with voice remaining free for life.

"Jio is in the process of fully complying with the regulator's advice, and will be withdrawing the three months complimentary benefits of Jio Summer Surprise as soon as operationally feasible, over the next few days,"the company said. People familiar with the matter said the offer may be closed in the next 24-48 hours.

Jio said all customers who have subscribed to the latest plan prior to its discontinuation will remain eligible for the offer.

Use TOI network to get traffic on your siteColombia  Melt 10 Kgs Every Day Using This (1) Weird TrickSlimNow Recommended By Colombia 

Trai's move comes amid increasing pressure on the regulator from incumbent telcos and the telecom department over the two promotions — Welcome Offer and Happy New Year - that ran from September 5 to March 31. They were cleared by the regulator but led to a brutal rate war, which hurt the industry's finances, leading to a sharp fall in government revenue.

The legality of Jio's offers and Trai's decision to clear them are already being challenged in the high court and the telecom tribunal, which has asked the regulator to revisit its decision. Jio, which has already attracted over 72 million paid users, has maintained that all its plans are legally complaint.

Market leader Bharti Airtel saw its net profit plunge 55% in the December quarter while Vodafone India posted a 1.9% drop in service revenue in the same period. No. 3 Idea posted its first net loss since listing in 2007 in that quarter. Weak industry financials have meant a nearly 30% sequential fall in provisional licence fee collections to Rs 2,300 crore in the March quarter, as per a Department of Telecommunications (DoT) presentation, in which it blamed the promotional plans for the slump.

With the industry's debt ballooning to Rs 4.85 lakh crore, telcos have sought relief to tide over financial turmoil. The department added that payments to the government and repayments to banks could be under threat if the situation didn't ease up.

Trai officials could not be reached for comment.

"Basically, a 30% hit to licence revenues would have jolted everyone, including banks that have Rs 4.85 lakh crore exposure to the telecom industry," said an expert. "There would be pres sure from the banks, whom telecom operators would be negotiating with for recasting loans."

RELIEF FOR INCUMBENT TELCOS

The incumbent telcos will heave a sigh of relief. "It's bad news for subscribers but good news for the industry. Hopefully, we will see rationality in pricing of tariffs now," said Rajan Mathews, director-general of the Cellular Operators Association of India (COAI), which represents Airtel, Vodafone and Idea as well as Jio. Prashant Singhal, consultancy firm EY's global telecom leader, expects the sector to regain some equilibrium quicker. "The revenue stabilisation, which was expected to have come in the next couple of quarters will now come sooner, within this quarter." Jaideep Ghosh, partner, management consulting, KPMG India, said incumbent telcos may see some traffic flow back to them provided they make competitive offers.


Under its Summer Surprise, all Jio Prime members making their first recharge payment of Rs 303 (or more) by April 15 got three months of complimentary services. Ambani had announced Prime membership on February 21 for a one-time fee of Rs 99. The membership, available for one year, gave customers the option to choose from multiple data packs starting from Rs 149.