Jio, Airtel, Vi Set To Add Rs 40,000 Crore To Their Kitty — Here's How

The cycle of rate hike triggered by Reliance Jio Infocomm Ltd. could potentially bring in an additional revenue of up to Rs 40,000 crore to the three top players in the telecom space, according to Kotak Institutional Equities.

The overall customer outgo on telecom services, inclusive of tax, could increase by Rs 47,500 crore annually. Telecom spending would only inch higher but still significantly below the levels prior to the Jio's launch, Kotak said in a note on July 27.

As a result of a tariff hike, the incremental revenue and Ebitda for the three private operators could inch up by Rs 40,000 crore and Rs 30,000 crore respectively, Kotak said.

The rate hike also augurs well for the sector and might boost the operators' average revenue per user, according to analysts.

Bharti Airtel Ltd. and Jio's new tariffs will compel higher spends by subscribers, boosting the ARPU and a tariff hike by Vodafone Idea Ltd. is awaited, CLSA said.

With all telecom operators keen on increasing the prices, this will be an ongoing correction. The low cost had its benefits but over a period of time, this is not sustainable, Sandip Das, former managing director of Jio, told NDTV Profit. "It was a correction that was required. It's coming in stages, but the sooner the better."

On Thursday, Jio hiked tariffs on existing plans in the range of 12.5–25% and introduced new plans. The changes come into effect from July 3. Post this announcement, Airtel announced tariff hikes for unlimited voice, data and postpaid plans by 10–20% on Friday.

The raising of prices of Jio augurs well for the industry and the companies in debt will see some relief as a result of this rate hike, Das said. "This has come at the right time and we will see a steady rise in the ARPUs, which will allow telecom companies to put more into their services."

Operator ARPU will increase meaningfully despite risks of down-trading and subscriber churn, CLSA said.

The brokerage forecasts for Airtel factor in an 11% year-on-year increase in the ARPU to Rs 228 in the current financial year and Rs 286 by fiscal 2027. "We also forecast Bharti's subscribers at 378 million by FY27CL from 352 million in 4QFY24."

For Jio, the overall average revenue per user will reach Rs 231 by fiscal 2027 versus Rs 181 currently, Jefferies India Pvt. said in a note. "More confident that its subscribers are unlikely to churn out."

Morgan Stanley also does not expect any tariff hike by Jio till fiscal 2027 and foresees a 17% rise in the ARPU by next year. "Another tariff hike of 20% can raise earnings by 10–15% and re-rate multiples further."

Dramatic price increases will not happen, but tariffs will rise across all plans, Das said.