Reliance Jio and Incumbents to See Effect of Data Tariff Hike By End of FY20

All the telecom operators are slated to benefit from the latest data tariff hike. However, the results are expected to show in the last quarter of the FY

By January 6th, 2020 AT 11:59 AM
Highlights
  • Reliance Jio is expected to benefit the most from the data tariff hike
  • The ARPU of the company is expected to rise to Rs 123
  • Vodafone Idea and Bharti Airtel will also shrink their losses

One of the major moves in the telecom industry in the last few days has been that of the tariff hike by the telecom companies. The companies like Reliance Jio, Vodafone Idea, and Bharti Airtel have hiked their tariffs by as much as 40% after Vodafone Idea first made the move. This data tariff hike has already been expected to boost the revenue of the companies by a certain extent and give a slight boost to the Average Revenue Per User (ARPU) as well. However, as per a new ET Telecom report, the major effect of this data tariff hike would only be visible in the fourth quarter of the FY in the January to March period. As per the analysts, the rise in the prices of the plans have unlikely caused any dips in the usage, and the reason for this is the wide adaptation of the long term plans which seem to be with a lot of subscribers of these telecom operators. However, in some of the cases, a dip is possible to be seen because of the number of internet shutdowns which have happened in the country following the protests in the country.

reliance-jio-arpu-data-tariff-hike

Reliance Jio to Witness Rise in ARPU

Out of all the telecom operators, it has also been established that Reliance Jio would set to gain the most from the data tariff hike. As per the words of Axis Capital, the Mukesh Ambani led telecom operator is likely to report a 60% rise in net profit, thus pegging it at Rs 1,578.2 crore in the December month. It would be Reliance Jio’s ninth consecutive quarter while it would be posting a profit. Another key contributing factor which would contribute to Reliance Jio’s dominating position is the Interconnect Usage Charges (IUC) which it started charging from the users a few months back. All of these factors, combined with the data tariff hike, are expected to up the ARPU of the company by 2.6%, thus pushing it to the levels of Rs 123 per user per month. It is worth noting that the ARPU of Reliance Jio has been on a decline since the last seven quarters.

Bharti Airtel and Vodafone Idea to Also Positivel Benefit

The data tariff hike is also expected to help the other two incumbent telecom operators, Vodafone Idea and Bharti Airtel to cut down their losses by a small margin to around Rs 4,324 crore and Rs 1,490 crore respectively. Both of these companies also witness a slight rise in their ARPU as well, which are expected to be pegged at Rs 129 and Rs 107 respectively.

AGR Dues Mount Pressure on Incumbents

The last quarter ending in September has been a rough one for both Vodafone Idea and Bharti Airtel as these companies posted massive losses. While Bharti Airtel posted a quarterly loss of Rs 23,045 crores, Vodafone Idea posted a loss of Rs 50,992 crore. These losses came out after the two companies accounted for the Adjusted Gross Revenue (AGR) dues which the telecom operators have to pay in January. The loss posted by Vodafone Idea was the highest one in the corporate history of India.

As per the analysts, it is going to take around 60 to 90 days for the full effect of the data tariff hike to be visible on the balance sheets. One of the worst hits for the telecom companies has been the pressure of the AGR dues, especially for Vodafone Idea and Bharti Airtel. While the former has got the pressure of paying Rs 53,000 crore to the DoT, Airtel has to pay Rs 35,500 crore.

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Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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