Reliance Jio gets a golden opportunity to hike tariffs and still stay ahead of rivals

  • Bharti Airtel and Vodafone Idea hiked their tariffs which will take effect from December.
  • This time around, their arch rival Reliance Jio might follow suit.
  • A few weeks back, Jio faced a customer backlash for increasing tariffs by a mere six paise.
Like in mythical stories, a great adversary leads to an unexpected windfall. Cornered into paying up as much as ₹92,000 crore in past dues to telecom department --- Bharti Airtel and Vodafone Idea did something they wouldn’t have otherwise dared to --- increase tariffs starting December.

This time around, their arch rival Reliance Jio might follow suit. Just a few weeks back, they faced a backlash for increasing tariffs by a mere six paise after government made them pay Interconnect Usage Charge (IUC) to other players. But this time, it might be an opportunity go with their rivals.

State-owned BSNL and MTNL are not real competition and are now consumed with staying afloat from heavy debt. This time around, Jio can ride the tariff hike wave without bellyaching from consumers and trolling by rivals, unlike the last time.

More importantly, Jio’s tariffs are lower than that of Vodafone and Idea by at least 30%, which means even if they increase tariffs, they will still be the cheapest. They can maintain their competitive advantage—without ruffling many feathers.

Jio might not look and sound as desperate as their competitors due to a recent equity infusion from a Canadian investor – but they too need tariff hikes. “Jio would have to increase tariffs as there is no way that they can carry on at the rate that they are going. It is just a matter of time,” Alok Shende, telecom expert and managing director at Ascentius Insights told Business Insider India, before the SC order.

However, Jio might have another hurdle as it has set new subscriber addition targets of attaining 500 million subscribers, as announced. And it still has a few million more to add as its subscriber base is currently at 348 million.

“RJIO’s pricing hinges on its aspiration of 500 million subscriber base and parent Reliance Industries’ aspiration of paring net debt to zero. Hence, considering higher subscriber acquisition target, we argue the company may delay tariff hike by a few quarters. That said, given the company’s ballooning debt and its commitment to reduce debt, tariff hikes look certain,” said a CLSA report in October.

While it might end the ultra low tariff party for subscribers, if Jio too joins in the bandwagon that Airtel and Vodafone started--- it will end the second telecom tariff war. That is the good news that telecom investors have been waiting for years now.



SEE ALSO

Airtel and Vodafone Idea hike tariffs after posting record losses

Whether you use Jio, Airtel, Vodafone-Idea, get ready to pay more for mobile services— sooner than later

Reliance Jio is paying the price for being the ‘second SIM’ of choice


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