Reliance Jio to get costlier soon: Here’s why Mukesh Ambani may raise telecom tariffs

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Published: July 29, 2019 5:19:02 PM

Reliance Jio, which brought disruption in the Indian telecom industry, is expected to surpass Bharti and Vodafone-Idea in terms of revenue market share by the end of 2019.

The move will likely ease the price competition between the large telcos.

Mukesh Ambani’s Reliance Jio may soon increase the prices of its subscription plans as the company looks to reap profits on the hefty investments made by the company, a report said. 

“We expect Reliance Jio (Jio), a subsidiary of Reliance Industries Ltd (BBB-/Stable) to raise tariffs gradually as it starts to focus on monetisation of its large investment,” Fitch Ratings said in a report released today. However, the same may not have much impact on the tariffs of rival companies as the telecom industry is currently ruled by three similarly sized telecoms — Bharti Airtel, Reliance Jio and Vodafone-Idea. However, the move will likely ease the price competition between the large telcos, the report added.

Financial Express Online has sent queries to Reliance Jio for further comments, and will update the story as and when the company responds.

Reliance Jio, which brought disruption in the Indian telecom industry, is expected to surpass Bharti and Vodafone-Idea in terms of revenue market share by the end of 2019. The company posted strong results for its Q1, recording revenue growth of 44% to $1.7 billion on a yearly basis. The same was aided by subscribers addition, while those of Vodafone Idea and Bharti Airtel continued to fall. However, that has not helped much with the company’s ARPU (Average Revenue Per User) which is at Rs 122 per month per user — among the lowest in the world.

Why are tariffs expected to increase?

At Rs 122 or $1.7 per month, the revenues generated by telecom industries in India remain one of the lowest, globally. “We believe that Indian consumers can afford to spend more on mobile services. This is evident from average monthly user data consumption increasing by 10 times since Jio’s market entry in September 2016, even though the average industry tariff has declined by over 50%,” Fitch Report said.

Even after the expected tariff hike, the data demand is not likely to go down as the cheap tariff is not the only reason behind the surge in data consumption. Data consumption is driven by the cheaper tariff and growth of more affordable Chinese smartphones, said the report. Hence, if the telcos increase the data tariff per megabyte slightly, the same won’t have much effect on the data consumption.

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