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Jio's new offer won't impact Bharti Airtel, Vodafone Idea much, say analysts

Telecom major Reliance Jio has announced Jio Phone 2021 offer which provides for a new phone along with three new plans. (Photo: Mint)Premium
Telecom major Reliance Jio has announced Jio Phone 2021 offer which provides for a new phone along with three new plans. (Photo: Mint)

  • The three-year lock-in period for Jio's existing users of JioPhone is coming to an end. So, analysts believe that the new offer is aimed at retaining Jio's 2G subscribers base. They, however, don't see this weighing heavily on rivals Bharti Airtel Ltd and Vodafone Idea Ltd

MUMBAI: Telecom major Reliance Jio has announced Jio Phone 2021 offer which provides for a new phone along with three new plans. It has a two-year plan, a one-year plan, and a special plan for existing users. These offer free calling for two years and 2GB data/month for Rs1,999. Those opting for the one-year plan will have to shell out Rs1,499, while existing JioPhone users can pay Rs749 for 12 months.

Investors should note that the three-year lock-in period for Jio's existing users of JioPhone is coming to an end. So, analysts believe that the new offer is aimed at retaining Jio's 2G subscribers base. They, however, don't see this weighing heavily on rivals Bharti Airtel Ltd and Vodafone Idea Ltd (Vi).

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"We don't foresee this offer to create a significant dent on the 2G consumers of Bharti/VIL. This is prima-facie on account of low-income strata of the target segment to shell-out upfront 1,999 as well as lack of handset choice acting as a barrier," analysts at domestic brokerage house Dolat Capital Market Pvt Ltd said in report.

Foreign brokerage house Credit Suisse is also of the view that the new offer is unlikely to have a material impact on peers. If at all, Vodafone Idea may be more prone to subscriber loss.

That said, analysts caution about some headwinds for the Indian telecom sector. "Competition + spectrum auctions + potential fund raise by VIL (deadline of 28 February for talks with consortium of lenders) doesn't augur well for the sector or any of the companies (Bharti, Indus, VIL or even Jio) from a short-term perspective," added the Dolat Capital report dated 27 February.

Meanwhile, research house Jefferies India Pvt Ltd has cut the price target of Bharat Airtel's stock to Rs600. "While we anticipated delays in tariff hikes due to divergence in Jio and Bharti's subscriber additions and downgraded Bharti Airtel in Jan-21, a tariff cut by Jio is a negative surprise. With MSCI rebalancing behind, we see limited positive triggers," said the Jefferies report dated 28 February.

On Monday, shares of Bharti Airtel and Vodafone Idea traded in the red, down around 1.5% each.

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