Jio's new offer dampens tariff hike talk, adds to Vodafone Idea's worries

Reliance Jio's new offer may impact Vi's fundraise plans, say analysts

Reliance Jio’s two-year discounted offer has dampened expectations of a tariff hike in the telecom space and has added to the woes of Vodafone Idea (Vi), which is looking to reduce subscriber loss and raise funds, analysts said. The new offer will also slow the recovery in average revenue per user (ARPU) of telecom companies, they said.
 
On Friday, Jio launched a new bundled offer giving customers a handset, two years of unlimited calls, and two GB data per month for Rs 1,999. A one-year plan with similar benefits will be made available for Rs 1499.
 
In a note, analysts at Jefferies said Jio’s primary focus is still on gaining subscribers, which dampens expectations of tariff hikes. In case of sharp underperformance, Jio will likely resort to tariff tweaks. It would not have cut tariff if its low-cost smartphone was to be launched in the near term, Jefferies analysts Akshat Agarwal and Ankur Pant said.

 

Jio has over 400 million subscribers, but has seen slower growth in customer addition in recent months. The new offer is part of its strategy to turn India to an exclusively 4G market.
 
Analysts at Emkay and HSBC believe the new offer poses challenges for Vodafone Idea.
 
“Jio’s move also comes as a caution to potential investors of Vodafone Idea that subscriber losses might not end in the near term and tariff hike hopes are also unlikely to get fulfilled soon,” analysts Naval Seth and Sonali Shah of Emkay Global said in a note.
 
HSBC Global Research in its analysis said Jio’s move would also raise concerns over Vodafone Idea’s plans. “Bharti Airtel has relatively higher 4G subscriber base with 166 million subscribers (around 54 per cent of its subscribers) versus Vodafone Idea, which has 110 million 4G subscribers (around 41 per cent of its subscribers) as of December,” it said.

 
Last September, the board of Vodafone Idea announced plans to raise up to Rs 25,000 crore through a mix of debt and equity. The company indicated that the fundraising plans are progressing well, denying any speculation of inordinate delay.
 
Following the December quarter results, Vodafone Idea’s Managing Director Ravinder Takkar said the company will not wait for competition to increase prices and hike tariffs at the right time.