shares of Reliance Industries (RIL) Mukesh Ambani-led group’s telecom subsidiary Jio was trading up over 2% in early deals on Monday after its rivals Bharti Airtel and Vodafone Idea (VIL) announced a price hike in their prepaid tariffs from next month. .
The tariff hike includes up to 21% hike in JioPhone plans, unlimited plans and data. Last week, Airtel and Vodafone Idea had announced a hike in their prepaid plan tariffs by up to 25% in a bid to bring financial reforms.
Reliance Jio has increased the prepaid smartphone tariff by 20%. The hike has restored Jio’s tariff exemption to Bharti. Analysts at Jefferies believe that with most JioPhone tariffs remaining unchanged, Jio subscriber base should remain strong. He said Jio’s willingness to increase smartphone tariffs augurs well for its long-term revenue/margin outlook.
“Jio’s current move of increasing tariffs for smartphone users indicates that it wants to improve realizations while maintaining a 10-15% discount to Bharti in the smartphone segment. This is positive for the revenue and margin outlook for both Bharti and Jio,” said Jefferies’ note.
Bharti and VIL have consistently indicated that tariff hikes will have to be continued from time to time to ensure that the ARPU reaches a near-sustainable level. 300. RJio has not given any official word on this, but the key to improving ROCE and sector valuation rerating would be to see continuous improvement to achieve ARPU 30-40% higher than the revised ARPU levels, said brokerage house Motilal Oswal.
“RJio tariff hike is the lowest across all price plans including Jiophone’s 28 day plan. This is better than our expectation of tariff hike only in the smartphone category. Thus the tariff hike could lead to incremental revenue/EBITDA. This will also increase Overall ARPU,” the brokerage said. Motilal Oswal’s buy rating on RIL shares comes with a target price of 2,900 per.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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