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Reliance Jio increases tariffs by up to 40%

The Mukesh Ambani-led Jio, which had started a tariff battle in the sector with its entry in 2016, has increased its headline price plans for the first time since its launch. Its two older rivals had raised their prices earlier this week, also by about 40%.

ET Bureau|
Updated: Dec 05, 2019, 02.27 PM IST
The Rs 199 plan is a month long valid plan, which offers 1.5GB per day, and is about 25 per cent cheaper than the plans of rivals offering similar benefits at a price of around Rs 249.
MUMBAI: Reliance Jio Infocomm raised its tariffs by nearly 40%, but some of its plans are almost 25% cheaper than those of rivals Bharti Airtel and Vodafone Idea, suggesting that the days of price war in the telecom sector may still not be over.

The Mukesh Ambani-led telecom operator, which had started a tariff battle in the sector with its entry in 2016, has increased its headline price plans for the first time since its launch. Its two older rivals had raised their prices earlier this week, also by about 40%.

“These plans will provide up to 300% more benefits to the Jio consumers (compared with previous plans), upholding the Jio promise of providing the best-quality service at the lowest price globally,” the telco said in a news release. The additional benefit refers to increased calling time during which Jio subscribers can call a rival network without being charged. Under some of its new price plans, this would be 1,000, 2,000, 3,000 or even 12,000 minutes.

In October, Jio started charging voice calls made to the subscribers of the rival networks, to account for the six-paise-a-minute termination charge it has to pay under local rules.

In line with Jio’s move, Vodafone Idea and Airtel had rolled out a ‘fair usage policy’ as part of their latest tariff hikes, to cap daily usage under their unlimited calling plans. After a limit, they too will charge customers 6 paise per minute for calls made to a rival network.

For Jio’s 355-million-plus subscribers, the new plans will be effective December 6.

The telco's most popular plans were those costing Rs 149 and Rs 399. Both offered 1.5 GB of data per day, for 24 days under the first one and 84 days under the second.

Now a customer will have to recharge for Rs 199 if he wants 1.5 GB data per day for 28 days. This Rs 199 plan is still 25% cheaper than the plans of rivals offering similar benefits, charging around Rs 249. Those using the Rs 399 plan will have to recharge for Rs 555, a 39% jump, to get the same amount of data for 84 days.

Analysts have welcomed the price hikes in the industry, which should help the sector reeling under debt of Rs 7 lakh crore. “It is about time Jio increased tariffs and started to monetise their investments,” IIFL executive vice president for markets and corporate affairs Sanjiv Bhasin said.

The price hike is expected to improve the telco’s average revenue per user (ARPU), which fell for the seventh successive quarter to Rs 120 in the July-September period. After the price hike, analysts estimate Jio’s ARPU to increase to over Rs 140 by the fourth quarter of fiscal 2020.

Airtel and Vodafone Idea, whose consumers have seen a tariff hike of up to 40% effective from December 3, are estimating a jump in their ARPU as well. Analysts estimate Vodafone Idea’s ARPU to rise to Rs 143 from Rs 107, and Airtel’s to move to Rs 145-150 from Rs 128 over the next two quarters.

“Jio will still be a beneficiary because the company doesn’t have overhangs such as the adjusted gross revenue (AGR) dues, like Bharti and Vodafone,” said Bhasin. He was referring to the October 24 Supreme Court order on AGR, which left the two older companies facing over Rs 89,000 crore in dues to the government and forced them to make provisions for the payments in the September quarter. Jio’s arrears, in comparison, are very small. Goldman Sachs also expects Jio to be the biggest gainer from the tariff increase. “We believe Jio is likely to see the highest increase in ARPU/revenue from the recent tariff hikes, due to a large proportion of smartphone users in its base,” it said in a report on Wednesday.

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