Reliance Jio phone push may delay tariff hike: Analysts

Tariff hike is the biggest catalyst for investors in the telecom sector. Jio's ARPU, which has grown from Rs 130 in FY20, is seen growing to Rs 202 in FY26. Analysts from Kotak Institutional Equities see the possibility of a tariff hike only after the Lok Sabha elections in April-May 2024.

Revenue growth of Airtel and Jio likely moderated in Q4 even as their user base grew at the expense of Vi.

Blended ARPU grew at a modest 0.3% q-o-q (quarter-on-quarter) to ₹178.8 (versus our estimate of ₹178.2) as subscriber mix improvements and rising contribution from FTTH (fibre-to-the-home) offset the lesser days in quarter q-o-q, Kotak Institutional Equities said in a report.

Jio is expected to focus on initiatives that encourage greater data usage, enticing users to transition to higher-tier packages. This strategy is anticipated to enhance Jio's average revenue per user.

The onset of 5G price wars along with a lack of significant tariff hikes and limited support from 4G tariff interventions, could slow Bharti Airtel's average revenue per user (ARPU) growth. The next issue for Airtel is its ARPU growth which could potentially come from losing subscriber market share, considering its lower capex for the quarter. Airtels India mobile capex spending was at Rs 5,685.6 crore, down 27.4% from Rs 7,829 crore in the June quarter.

Earlier this year, Jio made an aggressive play for the post-paid market by introducing competitively priced plans with family usage features and value-added benefits like subscription to over-the-top streaming services. Jio's current post-paid user base is estimated under 3% of its total user base.

Reliance Jio emerged as the sole telco to gain active mobile users in August 2023, while Bharti Airtel and Vodafone Idea (Vi) experienced declines, as per telecom regulator data. Analysts noted Jio's success in attracting older rivals' 2G users through the popular Jio Bharat feature phone amidst rising demand. Jio expanded its active user base to 417 million with an addition of 1.2 million users, while Airtel and Vi dwindled to 376 million and 199 million, respectively, shedding 0.4 million and 2.9 million active users each.

Billionaires Mukesh Ambani and Sunil Mittal may wait for the Lok Sabha elections to finish before increasing telecom tariffs in the second half of 2024. Jefferies expects a 20% tariff hike in the second quarter of fiscal year 2025. The government, which owns 33% stake in Vodafone Idea, may also favor tariff hikes to support the telco's survival. CLSA estimates that Bharti Airtel will lead tariff hikes to an Arpu of Rs 257 by fiscal year 2026.