Experts feel if Jio raises prices, it will also allow incumbents to raise their tariffs
Reliance Jio, the new entrant in the telecom space which shook the industry with its promotional offer of free voice calls and dirt cheap tariffs, may raise tariffs by 24% in the coming few days, according to a report.
Though the promotional offers started in September last year got over this year in April and the company started charging it’s users, it still offers low price plans. Currently, the lowest plan is at Rs 399 for three months, where voice calls are free.
“We expect Jio to raise tariffs by 24% on its most popular plan (Rs 399) in the next few days, based on the pattern of its recent price hikes. We already expect Jio to take away promotions altogether by end of FY18 and any such move in the near term would be viewed positively by investors,” Goldman Sachs said in an analyst report.
According to industry sources, Reliance Jio will soon be announcing a new tariff plan. Earlier, it had a plan of Rs 309 for three months.
“With three months having lapsed since the last price plan change, new plans could be in the offing and we expect Jio to potentially raise effective tariffs by 24 per cent/47 per cent/95 per cent for three months/two months/one month plan in the coming few days, based on the patterns of recent plan adjustments,” the report noted.
Existing operators including Bharti Airtel, Idea Cellular and Vodafone had to come out with similar offers to retain their subscribers. The entry of Reliance Jio has dented the financials of the industry with dipping profits and margins.
Experts feel if Jio raises prices, it will also allow incumbents to raise their tariffs. On Friday last week, Reliance Jio also announced its quarterly results for the first time for the three months ending September 30. And seeing the numbers, analysts expect the firm to come to profits in the ongoing third quarter.
Global research firm UBS in a report said Jio's maiden financial results demonstrate that the business has maintained strong momentum since it started charging in April, with continued growth in active and paying subscribers.
“Solid performance demonstrates strong underlying operating momentum. While reported Arpu (average revenue per user) appears a bit higher than consensus expectations, management's commentary looks to suggest the company is targeting Arpu increases in the coming months,” UBS said.
Another analyst report from JM Financial said Jio is expected to swing to profits in third quarter driven by the 57 per cent IUC cut to 6 paise/minute from 14 paise earlier, effective October 1.
As of second quarter, it had 138.6 million subscribers, with 15.3 million net additions in the quarter. Arpu stood at Rs 156, with average data usage of 10GB per subscriber and average Minutes of Usage of 626 minutes per subscriber. Reliance Jio Infocomm, a subsidiary of Reliance Industries, on Friday has posted a net loss of Rs 270.59 crore for the quarter ended July-September this year. The Mukesh Ambani-run firm recorded a revenue of Rs 6,147 crore.
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- An analyst report by JM Financial said that Reliance Jio is expected to swing to profits in the third quarter
- This will be driven by the 57% IUC cut to 6 paise/minute from 14 paise earlier, effective October 1
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