Reliance Jio New Postpaid Tariff “Unlikely” to Hurt Airtel Growth

“Therefore, low-end smartphones will come either with limited subsidy on the handset and affordable tariffs, or deep discount on handset but higher ARPU commitment,” ICICI Securities said in its note.

The firm said that the feature phone, unlike the smartphones may not be affordable on both handset and tariff prices. ICICI Securities highlighted that the limited subsidy and higher price of smartphones would “significantly limit impact” on Airtel and Vodafone Idea (VIL).

Vodafone Idea Requires Over 50% Hike in Tariffs

With P D Vaghela taking charge as the chairman of Telecom Regulatory Authority of India (Trai), ICICI Securities is expecting progress on the floor price for cellular data. The telecom operators in India including Airtel, Vodafone Idea and Reliance Jio proposed floor data prices in the range of Rs 20 to Rs 35 per GB. In late May, it emerged that the discussion on floor prices would happen after the COVID-19 lockdown was lifted.

“Operators may wait for clarity on floor price as its implementation in their favour may pave way for the next tariff hike, which would be sustainable, and provide level playing ground for Bharti and VIL,” ICICI Securities said in its note.

Similar to December 2019, tariff hike, ICICI Securities highlighted that VIL might introduce the new tariffs followed by other operators if no clarity soon emerges on data floor price. The firm estimates that VIL may require over 50% hike in tariffs. The operators in the previous month were hit with the adjusted gross revenue (AGR) verdict with the apex court providing a 10-year time period for the repayment of AGR dues.

“Bharti has seen highest conversion of tariff hike to revenue growth, which means it would gain on every tariff hike,” ICICI Securities said in its note.

The firm also highlighted that the upcoming spectrum auction will cause additional burden to Reliance Jio as the largest telecom operator will have to renew 850 Mhz of spectrum belonging to Reliance Communications. It recently emerged that Reliance Jio had urged the Department of Telecommunications (DoT) to hold auctions at the earliest. Reliance Jio has been using the airwaves from Reliance Communications particularly in the 800 MHz under a sharing agreement to enhance its 4G coverage across India. Reliance Communications airwaves in 18 circles are reported to expire during the months of July to August, 2021.

ICICI Securities highlighted that Bharti Airtel also has spectrum renewal in 2021, however, the operator is said to have “excess spectrum” due to its merger and acquisitions of Tata Tele, Telenor and Videocon. The firm projects Airtel renewal payout at only Rs 58 billion.