The recent hike in prices of the prepaid plans by the telecom companies has been the highlight for more than a week. Now, as events unfold, it is being reported that Bharti Airtel and Reliance Jio are expected to witness an additional $1 billion increase (around Rs 7,500 crores) in each of their Free Cash Flow (FCF) annually. According to an ET Telecom report citing Goldman Sachs, this rise in FCF is expected because of the growing market share at the expense of Vodafone Idea’s share in addition to the price hike.
Consequents of the Price Hike
It was also reported earlier that the Indian telecom companies have the world’s lowest Average Revenue Per User (ARPU) even after having the world’s second-highest data traffic. However, the recent price hikes are going to raise the ARPU of Jio and Airtel by Rs 20 and Rs 25 respectively by the end of March 2022. Vi on the other hand is in a struggling scenario as the cash-strapped telecom company hasn’t been able to improve its networks and neither has it been able to turn its low revenue-generating feature phone users to 4G services. Vi’s ARPU is expected to only rise to Rs 5 to Rs 114 by the end of March 2022.
On the other hand, it is also anticipated that there won’t be an effective increment in shares of Vi and Airtel after Reliance Jio announced the price hike in its prepaid plans on late Sunday evening. The shares of Vi rose about 4.3% whereas Airtel saw a 0.3% increment in its shares following the price hike by Jio. Reliance Jio witnessed a rise of 1.4% in its shares to rise up to Rs 2,447. The uniformity in price hike all over the telecom industry would mean that Airtel or Vi will not be able to increase the number of subscribers significantly.
The price hike on the other hand is very crucial for the future of Vi. It is speculated that these recent tariff hikes will help Vi to raise capital and pay off its pending fundraise which would finally help the telco to focus on ramping up its 4G networks. However, Reliance Jio and Bharti Airtel will be looking forward to gaining Vi’s share which will increase the FCF of the two telecom giants. As per the reports, Vi is required to raise $600-$800 million in the next six months to pay its obligations on non-spectrum debt.