Reliance Jio just sent a message for Vodafone Idea, Bharti Airtel investors

NEW DELHI: Reliance Jio Infocomm has a message for Bharti and (Vi) stock investors. The message, analysts said, is: the wait for tariff hikes can be prolonged.

Jio along with Reliance Retail has rolled out its ‘New JioPhone 2021’ offer starting March 1 in a bid to upgrade 30 crore 2G subscribers to 4G services. The news should worry Vodafone Idea's investors more than Bharti Airtel's, analysts said.

New users under this scheme will be provided a JioPhone device along with unlimited voice calls and data of 2 GB per month for one year at Rs 1,499, and for two years at Rs 1,999. Existing users can opt for the same, unlimited service for one year at Rs 749. The move is seen targeting bottom-of-the-pyramid subscribers.

Analysts said that the new plans may not only arrest the recent increase in churn rate for Jio, but may also send a message that tariff hikes are still away.

Renewed aggression
The key reason, they said, could be the significant moderation in subscriber additions in the last few months. Jio's inability to make any major headway in the postpaid market, despite aggressive efforts made in Sep 2020, could be another reason for such offerings.

Brokerages said that free voice calls across networks as a result of zero IUC (interconnect usage charge), delay in the launch of a low-cost 5G smartphone, and fear of losing current JioPhone users whose three-year security deposit payback scheme is coming to an end could be among reasons why Jio came up with such plans.

A message
Emkay Global said that Jio’s move comes as a caution to potential investors of Vodafone Idea that subscriber losses might not end in the near term and hopes of tariff hikes are also unlikely to get fulfilled anytime soon.

"On the other hand, Bharti has been reiterating that its focus is on adding premium/quality subscribers and improving the mix, instead of diluting ARPU with a focus on bottom-of-the-pyramid subscribers. At the current juncture, we maintain our assumptions for Bharti and VIL and maintain our 'buy' rating on Bharti. However, continued delays in tariff hikes present a lack of near-term re-rating triggers for Bharti despite exceptional execution in the last few quarters," the brokerage said.

Kotak Institutional Equities said that upfront payment may be a deterrent for incremental customers despite attractive propositions.

But it may also allow Jio to gain new lower-end customers, who may have the ability to pay higher upfront charges in lieu of an upgrade to unlimited voice and data connectivity.

"This will pose another challenge for Vodafone Idea, as it continues to lose subscribers. Bharti may have a limited impact, as it continues to gain ground on the larger 4G smartphone user base in recent times," Kotak said.