Despite Losing 80% Growth, Jio May Increase Tariff Before Airtel, Vi: Find Out Why?
Reliance Jio might soon introduce tariff hikes, Though many experts think the telco would keep its tariffs the same in the near term and target a higher market share.
Jio hasn’t been able to add as many users as it did in its early years. For the first four years, the telco added about 100 million subscribers a year. However, the telco only added 21 million subscribers in 9MFY21.
According to a report by ICICI Securities, Jio is expected to continue attracting subscribers at the same pace in the next two years. According to the survey, Jio will add about 20 million subscribers in FY22E and 15 million in FY23E.
Reasons Behind The Slowdown In The Growth Rate Of Reliance
The slowdown in Reliance Jio’s subscriber base growth can be attributed to several factors. Fewer JioPhones are available, and the company’s reputation has suffered as a result of farmer protests, to name a few factors.
Jefferies said in a note.“We believe tariff hikes are unlikely till Reliance Jio can stabilize its subscriber additions. Our analysis suggests that that smartphone subscribers form an estimated 75% of Jio’s revenues, which is why we don’t expect Jio to be aggressive in this segment and maintain its 7-20% tariff discount. As a result, Jio could follow tariff hikes in the smartphone segment and we build a 10% tariff hike in 4QFY22 and 4QFY23,” it added.
One of the main reasons for the decline in growth rate may be that the demand has reached saturation. Jio is attempting to break into India’s deeper 4G market, which is why the telco’s results would be late.
Because of the faster availability of low-cost smartphones, Jio’s fortunes can change a little faster and add more subscribers than anticipated.
Jio’s Average Revenue Per User
Continuity Because of a large number of high-paying 4G users, Jio’s average revenue per user (ARPU) may be the highest shortly. However, because of a higher proportion of inactive subscribers and a higher penetration of the low-paying JioPhone user base, the telco’s ARPU has slipped in the short term.
Jio will boost its ARPU by expanding its fibre-to-the-home (FTTH) service, which has a higher ARPU than the mobile business. Tariff hikes may be Jio’s first goal.
According to ICICI Securities, Jio will seek an early tariff hike. The telco may raise the benefits associated with its plans’ prices to entice more customers to use its services. However, Jio can only raise tariffs if the existing market structure is preserved.
Because of the recent acquisition of spectrum worth Rs 571 billion and leases to towers and fibre InvITs, Jio’s cost inflation is expected to be very high in the near term. If the telco’s sales do not increase, it will announce a drop in profits.