Shares of Bharti Airtel Ltd and Vodafone Idea Ltd surged on Thursday after most profitable telecom operator Reliance Jio said it will end free voice calls on its network.
Bharti Airtel Ltd soared 4%, while Vodafone Idea gained 18%. Reliance Industries Ltd rose 2.5%. In last three sessions, Bharti Airtel gained 10% while Vodafone Idea advanced 30%.
Reliance Jio said late Wednesday it will start charging for calls made to rival networks at 6 paise a minute. This comes as a major relief for rivals Bharti Airtel and Vodafone Idea which have been left bleeding financially as a result of the rock-bottom tariffs offered by the Mukesh Ambani-controlled company.
Analysts believe Jio’s tariff hike is prima facie positive for the industry as it enables other operators to raise tariffs too. Other operators may not take the price hike in the same form though considering its potential negative effect on user experience. Other operators may see a drop in calls terminating on their networks, but the tariff hike should be able to compensate for it well.
The move came after Telecom Regulatory Authority of India (Trai) on 18 September floated a fresh consultation paper to see if there is a need to revise the applicable date for scrapping interconnect usage charge (IUC), given the continuing imbalance in inter-operator traffic.
"This works out to a price hike of about 14%. However, we believe that additional charges for off-net calls would disincentivise users to call other operators, which would reduce off-net call volumes for RJIO. We expect additional charges to drive up revenue ~5%, which would translate into ~10% increase in EBITDA," said Edelweiss Finance in a note to its investors.
"We believe the tariff hike from the price-setter is positive for the telecom industry and will provide other operators leeway to hike prices proportionately. We anticipated a price hike by RJIO in H2FY20. But the way the price hike has been taken is perplexing considering it may cause inconvenience and anxiety to subscribers. Other operators may follow suit, but by simply raising the tariff," the report added.