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Jio pours cold water on tariff hike hopes

Reliance Jio’s new plans lower JioPhone’s usage costs by 23-25%. (File Photo: Mint)Premium
Reliance Jio’s new plans lower JioPhone’s usage costs by 23-25%. (File Photo: Mint)

  • In terms of signalling, Jio’s new plans suggest pressure on yields, compared to investors’ hopes of an increase. Of course, these plans are targeted at a segment that isn’t a very big contributor to Jio’s revenues and profits. As such, the impact on its own profits will be limited

While investors in telecom stocks have been waiting for months for the next round of tariff hikes, market leader Reliance Jio Infocomm Ltd has taken a step in the opposite direction.

It has announced a “New JioPhone 2021" offer, which targets both new and existing users. “Reliance Jio’s new plans lower JioPhone’s usage costs by 23-25%. While we expected delays in tariff hikes, Jio’s move has surprised negatively and indicates that Jio’s primary focus is still on subscriber gains," analysts at Jefferies India Pvt. Ltd said in a note to clients.

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Shares of Bharti Airtel Ltd fell over 4% on Monday. “Our analysis suggests that this offer may be attractive for feature phone users looking to change devices," analysts at Jefferies added.

But most analysts do not expect a major impact on subscriber numbers, as the new plans have a relatively high upfront cost and is targeted at the bottom end of the market.

“We don’t foresee this offer to create a significant dent on 2G consumers. 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 choices acting as a barrier," analysts at domestic brokerage house Dolat Capital Market Pvt. Ltd said in a report.

But in terms of signalling, Jio’s new plans suggest that there could be pressure on yields, compared to investors’ hopes of an increase.

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