We conducted sales and distribution channel check to understand consumers’ response to RJio’s recently launched ‘Welcome Offer’, wherein users can access free pan-India voice and data services. We also discuss the company’ sales target and possibility of achieving that. SIM card distribution channels: SIM cards are currently distributed only via the Reliance Retail channel. Distribution in mom-and-pop and modern stores will be started in 15-20 days. RJio has mapped 2.5lac SIM distributors, and over the coming quarters, we expect it to reach closer to the current number of SIM distributors (4.5lac) and sellers of recharge vouchers (8lac) in the market. ? 1lac SIM sales/day: The run-rate of SIM card sales since the launch of the welcome offer is 1lac/day. With addition of more distribution channels (e.g., modern and mom-and-pop stores), our channel check indicates the run-rate to go up 3-4x. Total current subscriber base is 5m.

The welcome offer may facilitate high subscriber addition given free offerings, but RJio’s key test will be to retain subscribers at INR200+ ARPU. We have factored in about 30m subscribers by FY17E (~4m monthly subs addition) and 60m by FY18E at ARPU of INR216. This leads us to assume EBITDA loss of INR51b and IRR of 7.5%. The key monitorable will be whether the company can reach 60m subscribers by March-June’17 with ARPU of INR 200+. This will be nearly 9-12 months ahead of our expectatio