Jio has hiked the tariff on its 28-day validity plans by 12-14%
Telecom analysts expect the tariff hike introduced in December will not reap concrete benefits for telecom companies, especially Reliance Jio, till the first quarter of 2020-21 financial year. Before this round of tariff hikes, the 28-day mobile plans were giving telecom operators maximum returns, as longer duration prepaid plans were at a discounted rate in the range of 10 per cent and 45 per cent.
“Jio’s new tariff plans would start from December 6. Hence, the full benefit of the new tariff plans may not be visible in the March quarter, but come through from the June quarter,” wrote Pinakin Parekh, research analyst at JP Morgan. Parekh noted that the Rs 50 vouchers, which Jio’s existing subscribers have, would be eligible in the new tariff plan recharge (and to that extent, the recharge would be Rs 50 lower based on the voucher used).
Further, given the knowledge of impending tariff hikes, many subscribers are expected to have recharged ahead of the planned hikes, giving minimum benefits to telcos in the October-December quarter.
While the subscriber break-up across duration plans was not shared by the telcos in the Q2 results, Jio
spokespersons had noted they had been witnessing increasing uptake of longer duration plans among subscribers, as those plans offered higher value for money.
Both incumbent telecom operators — Bharti Airtel and Vodafone Idea — have announced around 25 per cent tariff hikes for their popular prepaid plans, where almost 60 per cent of subscribers reside. However, the minimum recharge plans (that subscribers need to keep the number active) have been hiked by 40 per cent.
Lower incremental cost on prepaid plans just above the minimum recharge plans are expected to give subscribers stronger reasons to upgrade to higher average revenue per user (ARPU) plans. A noticeable change has been the discontinuation of 1 GB a day data plans in favour of 1.5 GB per day plans, which cost 15-40 per cent higher.
Analyst note that operators have opted for higher benefits despite price premium, effectively reducing network utilisation pressure as well by lower ARPU users.
has hiked the tariff on its 28-day validity plans by 12-14 per cent, suggesting that its focus remains on high subscriber acquisition. The largest hike (39 per cent) is in the 84-day category. Jio
has also introduced a new 56-day category that offers more voice calling benefits (including offnet charges) compared to the 28-day one,” wrote Rajiv Sharma, head of research, SBICap Securities.
This new category, however, comes at a higher cost per GB pricing for the consumer, which suggests that Jio no longer intends to incentivise deep discounting. This will result in around 29 per cent ARPU boost by FY21 and $1.5 billion earnings before depreciation, taxation and amortisation (Ebitda).
Prior to these hikes, Jio’s 28-day category plans were available at a 25 per cent discount, compared to rival telcos, while the 84-day plans were available at a 10 per cent discount. The current hike could also drive Jio customers from the popular 84-day plans towards the 28-day ones.