Connect with us

Headlines of the Day

Brokerages comments on hike in tariffs by Jio and Airtel

Mobile phone bills are set to increase as Reliance Jio, leading the change, announced a tariff hike on June 27 —the first in 2.5 years.

Within 24 hours, Bharti Airtel also implemented a similar increase.

Jio’s tariffs will rise by 12.5% to 25%, while Bharti Airtel’s will increase by 10% to 20%.

These anticipated hikes will take effect starting July 3.

In the last two rounds of tariff hikes, Vodafone Idea (in December 2019) and Bharti Airtel (in December 2021) took the lead, while Reliance-Jio was the last one to raise tariffs.

Analysts are seeing the hikes as a positive development for the telecom industry.

“Unlike, Bharti Airtel and Vodafone Idea, who have been very vocal on the need for industry tariff repair, Reliance Jio has not been upfront about the need for industry-wide tariff hikes. Reliance Jio taking the lead on raising tariffs is a sentimental positive for the telecom industry,” brokerage Kotak Securities said in a note.

What are the new tariffs for Jio and Airtel’s entry-level plans?
Jio tariff increase for the entry-level plan, which includes the most price-sensitive customers, is 22% to ₹189 per month.

For Airtel, it’s an increase of 11% to ₹199.

What about tariffs for the popular Jio and Airtel plans?
For the 1.5GB/day plan, Jio has increased tariffs by 20% to 25%, while Bharti Airtel has raised them by 16% to 20%. The 1.5GB/day plan has been used for illustrative purposes as both the companies have a variety of plans.

Bharti Airtel plans are still at a premium to Jio, whether its entry-level plans where Jio is ₹189 and Bharti Airtel is at ₹199, or for 1.5GB/day plans for a month, where Bharti Airtel is at ₹349 while Jio is at ₹299, and for the 3-month plan, where Bharti Airtel is at ₹859 and Jio at ₹799.

There is an increase in postpaid plans for Bharti Airtel.

How do the tariff hikes impact the companies’ financials?
One can expect an improvement in average revenue per user (ARPUs) till the December quarter.

Jio’s ARPUs have been stagnant for the last few quarters hovering around ₹182 due to the absence of tariff change, while Bharti Airtel ARPUs have been inching up slowly.

Analysts say the goal should be to hit ₹300 to enable a financially healthy business model for telecom companies in India.

While hiking the price, Bharti Airtel said in its press release, “We have maintained that the mobile ARPUs need to be upwards of ₹300, to enable a financially healthy business model for telecom companies in India.”

How have telecom stocks reacted?
Bharti Airtel is up 45% year to date.

Vodafone Idea is up significantly from its follow-on public offer (FPO) price.

What do analysts expect?
Following the tariff hike, Jefferies raised the target price of Reliance Industries (RIL) to ₹3,580 per share.

Morgan Stanley retained its ‘overweight’ call on Reliance.

Analysts will now keenly watch out for a tariff hike by Vodafone Idea. CNBCTV18

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!