Reliance Jio Might Not Increase Tariffs Until it Reaches 500 Million Subscribers: Analysts

Reliance Jio is still afflicting other telecom operators with its low priced tariff and intense subscriber acquisition strategy

Highlights
  • Reliance Jio is expected to reach 497 million subscribers by FY 2020
  • Currently Reliance Jio boasts of having 340 million subscribers

Reliance Jio may continue to offer its plans in the same prices, thus hurting the chances of other rival telecom operators as per the analysts. According to an ET Telecom report, Reliance Jio continues to chase its goal of 500 million subscribers and does not seem to be putting a hold on its intensity. This move is eventually bound to have an effect on other incumbent telecom operators like Vodafone Idea and Bharti Airtel. This could also mean that Reliance Jio might not hike its tariffs any time soon.

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Reliance Jio Aiming to Hit 500 Million Subscribers

According to Rajiv Sharma, co-research head at SBICap Securities said, “We don’t see telecom tariffs improving anytime soon with Jio emphasising its aspiration for 500 million 4G subscribers, which is a negative for Vodafone Idea’s share price and will also limit any further upsides in Bharti Airtel.” The first effect of Reliance Jio’s announcement of JioFiber has shown its impact on the share prices of Vodafone Idea and Bharti Airtel. Vodafone Idea saw a decline of 6.4% to close at Rs 5.02 on Tuesday while Airtel shares fell nearly 7% in intra-day trade before closing 5.3% lower at Rs 351.65 on BSE. On the other hand, Reliance Jio’s shares went up by 10% and closed at Rs 1,275 on the exchange.

Analysts had predicted returning stability in the telecom industry and easing of the price war a few months back. However, with Reliance Jio’s continued affliction over other telecom operators, this might contradict the prediction that analysts made regarding the industry. To recall, Reliance Jio kicked off the data tariff war three years ago in 2016, and since then, it has caused the other telecom operators to bring down their tariffs and hurt their financials. It was also the reason why other small telcos exited the industry, and the sector went through a consolidation phase, leaving three telecom operators – Bharti Airtel, Vodafone Idea and Reliance Jio.

READ:  5 Ways Bharti Airtel is Heating Up the Fierce Competition with Reliance Jio

Vodafone Idea Predicted to be Weakest Telco Amongst the Three

As per Kotak Institutional Equities, Reliance Jio’s user base would swell to 497 million (from 340 million now) by FY22, largely driven by 10 million monthly adds run rate. The ARPU of the company is also expected to rise to around Rs 150 from the current levels of Rs 122. Bank of America-Merrill Lynch says that out of all the three telecom operators, Vodafone Idea is likely to be the weakest. On the other hand, Reliance Jio’s parent will be helped by a new Aramco deal which is a Saudi Arabia based company ready to buy 20% stake in RIL’s oil-to-chemicals unit at an enterprise valuation of $75 billion. Vodafone Idea’s revenue also fell down lower than Reliance Jio’s for the first time.

As per the analysts, Reliance Jio’s move of launching a fibre-based broadband service combined with a high definition TV set-top box is likely to push Airtel to hasten its merger with Dish TV to hold on to its DTH subscriber base. With that being said, analysts have said that Reliance Jio’s new service is not disruptive and could instead help expand the market for other players like Airtel.

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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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ShekharChetanGirish Gowda | BengaLuruKrrishNasir Iqbal Recent comment authors
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Shekhar
Shekhar

Idea cellular rocks after merger

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Girish Gowda | BengaLuru
Girish Gowda | BengaLuru

These analysts have been wrong about Jio 100% of the time for the past 3 years. Pretty good, plush salary for giving wrong analyses over plenty of years on everything.

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