Reliance Jio joins Airtel, Vodafone Idea to raise tariffs

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Updated: November 20, 2019 4:23:40 AM

Currently, data rates for consumers at an average of Rs 8 per GB is the lowest in the world. The average revenue per user per month has declined from Rs 174 in FY15 to Rs 113 in FY19. A subscriber on an average uses 10 GB of data and 700 minutes of mobile talk time per month.

Reliance Jio, Airtel, Vodafone Idea, telecom tariff, industry news,  Bharti Airtel,  Bharti Airtel share,  Bharti Airtel ltd,  Bharti Airtel news,  Vodafone Idea share price,  Vodafone Idea news,  Vodafone Idea india,Reliance Jio shareCurrently, data rates for consumers at an average of Rs 8 per GB is the lowest in the world.

Telecom tariffs are finally set to rise with Reliance Jio also on Tuesday stating that to strengthen the industry it will take measures like increasing tariffs in the next few weeks. On Monday, Vodafone Idea and Bharti Airtel had said that they will increase tariffs from December.

This will be the first time since September 2016 — when Reliance Jio launched its services — that tariffs will be revised upwards by the telecom companies. However, none of the companies have said by how much will the tariffs be raised and whether the hike will be an increase in headline rates or realisations will improve by way of reducing the validity of pre-paid vouchers, etc.

“Like other operators, we will also work with the government and comply with regulatory regime to strengthen the industry to benefit Indian consumers and take measures, including appropriate increase in tariffs, in the next few weeks in a manner that does not adversely impact data consumption or growth in digital adoption and sustains investments,” RJio said in a statement.

Currently, data rates for consumers at an average of Rs 8 per GB is the lowest in the world. The average revenue per user per month has declined from Rs 174 in FY15 to Rs 113 in FY19. A subscriber on an average uses 10 GB of data and 700 minutes of mobile talk time per month.

Sources said that with the three operators deciding to hike tariffs, it may not be necessary for the Telecom Regulatory Authority of India to initiate any move to set a minimum charge for voice and data services to ensure that the financial health of the telecom sector remains robust and viability is sustained. “The move by operators to increase the tariff is a step in the right direction as there’s scope for them to do so. This way the Trai need not take any steps to set a floor price for voice and data, and forbearance with regards to tariffs can be maintained,” a government source said.

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“Our analysis shows an average realisation per user increase of 10% by Bharti and Vodafone Idea will result in 10% wireless revenue growth and 20% wireless Ebitda growth based on Q2FY20 financials,” Elara Capital said in a note on Tuesday.

“Price increase is a first-of-its-kind development in the sector, if our memory serves us right. The event gains significance in the backdrop of the vocal relief demands from both the companies after the recent adverse Supreme Court judgment on the AGR case. One of the key demands, we note, has been a regulated floor on pricing. We do note that Trai’s final decision on IUC (move to zero or extension of the 6 paise/minute regime) is still awaited,” Kotak Institutional Equities said in its report.

The Kotak Institutional Equities report added: “ Price increase announcements by Bharti and VIL suggests that the two companies expect an extension, in our view. An extension would mean Jio does not roll back the price increases it took recently. This would mean increased degrees of freedom on pricing for Bharti and VIL, in our view.”

Motilal Oswal Institutional Equities said that they expect a 15% hike by Vodafone Idea and Bharti Airtel such that both telcos could command the same premium they used to enjoy over RJio prior to its launch in 2016. For both VIL and Bharti, the hike would be on 45% of their customers base — non-feature phone users — that account for 70% of revenues. For Bharti, it will be on 40% of consolidated Ebitda.

Meanwhile, on Tuesday, shares of Vodafone Idea, Bharti and Reliance Industries rallied on the news that the two operators would increase tariffs and the third was expected to make similar announcement. In the last three trading sessions, shares of Vodafone Idea surged 100% while that of Bharti Airtel rose 21.1%, as investors lapped up beaten-down stocks.

As is known, Bharti Airtel and Vodafone Idea reported a combined loss of Rs 74,000 crore last week. The huge quarterly loss was due to a one-time charge to pay fees related to a Supreme Court ruling on adjusted gross revenue.

The market capitalisation of Bharti Airtel and Vodafone Idea has increased by Rs 48,261 crore in the last three sessions. While the Sensex remained flat with a gain of just 0.5%, the stock of Bharti Airtel surged 21.1% during the same period. Analysts are of the view that Bharti Airtel’s Q2 operational performance was robust, across most of its businesses, especially the India telecom business.

Bharti Airtel surged the most on Sensex on Tuesday, gaining as much as 7.4% to hit a 22-month high of Rs 439.25 on the BSE. That was followed by Reliance Industries, which increased 3.5% on Tuesday. The market valuation of the oil-telecom-retail major also hit a record high at Rs 9.6 lakh crore — the first Indian company to reach the milestone.

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