Reliance Jio unlikely to hike tariffs before FY25, ARPU may remain range-bound

economictimes.indiatimes.com:

Mukesh Ambani continues to focus on market share gains in the telecom space, any tariff hike by Reliance Jio is unlikely in FY24, analysts say. During the June quarter, Jio's average revenue per user or APRU grew 2.8% year-on-year (YoY) at Rs 180.5 due to increased data consumption, improvement in subscriber mix, and rising share of revenues from the home broadband business. «Hefty network capacity additions with the recent JioBharat launch suggest a higher focus on subscriber gains and do not bode well for tariff hikes.

Hence, we change our tariff hike assumptions of 15% hike towards end-CY23 to 20% hike in 2QFY25, which leads to a 3-5% cut to our FY24-26 Arpu assumptions,» Jefferies analysts, including Akshat Agarwal said. Tariff hike is the biggest catalyst for investors in the telecom sector. Jio's ARPU, which has grown from Rs 130 in FY20, is seen growing to Rs 202 in FY26.

Analysts from Kotak Institutional Equities see the possibility of a tariff hike only after the Lok Sabha elections in April-May 2024. «In our base case, we assume moderate tariff hikes to continue with R-Jio’s wireless ARPU reaching Rs 300 by 2033 (versus Rs 173 at end-FY2023), recording 5.7% 10-year CAGR (versus 10% CAGR over FY20-23). We no longer build in optional value for duopoly explicitly, but with Vodafone Idea’s cash flow constraints, we continue to assume market share gains for R-Jio (7-8 percentage points gain in subscriber/revenue market share over FY2023-33),» Kotak said.