India’s number one telco, Reliance Jio, might soon introduce tariff hikes. This would be a surprise for the market since many expect the telco to keep its tariffs the same in the near term and target a higher market share.
Jio hasn’t been adding as many subscribers as it did in its initial years of operations. The telco added around 100 million subscribers every year for the first four years. But after that, in 9MFY21, the telco only added 21 million subscribers.
According to an ICICI Securities report, Jio is expected to keep adding subscribers at the same rate in the next two years as well. The report suggests that Jio will add around 20 million subscribers in FY22E and 15 million subscribers in FY23E.
There are multiple reasons behind the slowdown in the growth rate of Reliance Jio’s subscriber base. Less availability of the JioPhone and adverse reputation for the company because of the farmer’s protests are just a few of the reasons.
One of the major reasons behind the slowdown in growth rate could be reaching the market saturation point. Jio is trying to penetrate the deeper 4G market in India, and that is why the results will come slowly for the telco.
Jio might change its fortunes a little faster and add more subscribers than predicted because of the faster availability of low-cost smartphones.
Jio’s ARPU Could be The Highest in Overall Market
Reliance Jio’s average revenue per user (ARPU) could be the highest in the coming time because of a large number of high-paying 4G subscribers. But the telco’s ARPU has dipped in the short term because of the higher proportion of inactive subscribers and also higher penetration of the low-paying JioPhone subscriber base.
Jio can increase its ARPU by growing its fiber-to-the-home (FTTH) segment that brings in higher ARPU than the mobile business.
Jio Might Target Tariff Hikes Early
ICICI Securities said that Jio might aim for an early tariff hike. The telco might increase the benefits with the prices of its plans attracting more customers to purchase its services. But Jio would only increase tariffs if the current market structure is maintained.
Jio’s cost inflation is expected to be very high in the near term because of the recent purchase of spectrum worth Rs 571 billion and rentals to towers and fibre InvITs. If the telco’s revenues don’t grow, it might report a dip in the earnings.
Tanay is someone with whom you can chill and talk about technology and life. A fitness enthusiast and cricketer, he loves to read and write.