Reliance Jio’s decision to extend its free offer to subscribers for an additional three months from 1 April (summer surprise) shows that acquiring free customers is one thing, retaining them for longer periods as paying customers is quite another.

Having registered more than 100 million free subscribers by February, Jio offered them a rate of Rs 303 per month for one GB a day – the so-called Jio Prime offer. The offer was to end on 31 March, but Jio has now extended it for a further 15 days even after acquiring 72 million Prime paying customers. Those committed to the Rs 303 plan (or higher plans) get three months more free.

It may or may not be a slippery slope, for weaning people away from freebies is tough. Those who logged in early will thus have got nine months of free Jio services. The sobering thought is that even after investing a massive Rs 1.7 lakh crore to create India’s largest mobile services network, there is no guarantee of easy success.

A Moody’s report says that even if Reliance Jio were to generate Rs 20,000 crore of revenues, the free cash flows will not be enough to cover projected annual investments of Rs 15,000 crore, leave alone cover the cost of capital. Moody’s thus concludes that Jio will remain a drain on Reliance Industries’ cash flows for a couple of more years.

Investors need to keep their fingers crossed because even the Jio Prime Rs 303 offer is valid for a month (or 28 days, to be exact), and there is no guarantee that users will not switch whenever they find a better deal from some other service provider. The proposed merger of Vodafone and Idea, and the acquisition of Telenor by Airtel, means that the industry is consolidating quickly, but as long as there are other big players still in the arena – Tata Tele and Reliance Communications – tariffs won’t stabilise enough to provide a remunerative return on investments.

Jio will be hoping that with free voice, data will become the prime reason for buying Jio cards. Also, Indians have taken to dual Sim phones by default. But dual Sim phones can carry only one data slot. If Jio occupies that slot, it will essentially edge out the second Sim, since voice anyway comes free for the user with the Jio data Sim.

But customers may not be accustomed to seeing their options this way, and it may take a while for Jio to ensure that it is the only occupier of the customer’s Sim slots.

If Vodafone-Idea will have 400 million customers after merger and Bharti-Telenor over 300 million subscribers, for 42 per cent and 35 per cent revenue market shares respectively, Reliance Jio’s ambition of having a 50 per cent revenue market share is only realisable if it seeks a merger with Anil Ambani’s Reliance Communications, after it completes its merger with Aircel.

A merger of two Reliance mobile companies looks imperative.