India's largest telecom services provider Reliance Jio took the lead in raising tariffs as it revised upwards charges of all its postpaid and prepaid plans on Thursday.
The increase ranges between 12% and 25% depending upon the plan and will be effective from 3 July, according to a statement shared by the carrier.
“The introduction of new plans is a step in the direction of furthering industry innovation and driving sustainable growth through investments in 5G and AI technology. Ubiquitous, high-quality, affordable internet is the backbone of Digital India and Jio takes pride in contributing to this. Jio will always put our country and customer first and will continue to invest for India,” Akash Ambani, chairman, Reliance Jio Infocomm Ltd, said.
On the postpaid side, its ₹299 and ₹399 monthly plans will be charged ₹349 and ₹449, with bundled data amounts remaining same.
The monthly prepaid plan of ₹239 giving 2GB data free per day has seen the steepest increase of 25% to ₹299, while ₹399 plan giving 3GB data free per day, will be priced 12.5% higher at ₹449.
The new plans come bundled with JioSafe and Jio Translate that are free for a year. The safe app is a secure communication app for calling, messaging and file transfer, while JioTranslate is an AI-powered multi-lingual communication app for translating voice call, voice message, text and image. The apps will be chargeable at ₹298 after one year.
Industry insiders said that rivals Bharti Airtel and Vodafone Idea would follow suit with tariff increases as well, that may take place in the coming days. The carriers did not comment to Mint's queries as of Thursday evening.
The hike was much anticipated and was likely to take place after the general elections that ended earlier this month. Analysts said that the move is good for the industry and despite the increase, the impact on the consumer will be minimal. India continues to be the market with the lowest data tariffs and free voice service.
"An increase of ₹20-30 per month for low ARPU (average revenue per user) may not affect the customers considering that the sector had not had any inflationary increase as well over the past couple of years. Bharat still remains one of the lowest tariff countries in the world and there is clearly another tariff hike which is a must over the next 6-12 months for the sector to be self sustaining in investing more on innovation,” Prashant Singhal, leader for tech, media and telecom as well as emerging markets at consultancy firm EY Global, said.
Several brokerages had estimated 20-25% hike in tariffs in 2024, on the lines of similar increases having taken place in the past two instances since 2019. In 2019, telcos took the first tariff revision, increasing them by 20-40%, while in 2021, they increased it by 20-25%.
"We have baked in tariff hikes of 25% spread over 2Q/3QFY25,” said analysts at JPMorgan, noting that ability to raise headline tariffs soon after auctions led to sharp stock reactions. Airtel and Vodafone Idea stocks saw a spike in trading on Tuesday.
"For Bharti Airtel we assume a 20% ARPU increase in the upcoming September quarter and a 20% increase in FY26, this would translate to a near 10% uplift in India Ebitda in FY26 (our estimates) and potentially improve fair value to ₹1,410- ₹1,660 per share," analysts at Macquarie said in a note. The 20% increase in Arpu would translate to Arpu of ₹245-295 per month from ₹209 in the quarter ended March 2024, they said.
Any potential increase in tariffs will lead to increase in ARPU, a critical benchmark of profitability. Currently, industry Arpu's range between ₹130 per user per month and ₹210. Telcos have been advocating for this number to go up. Airtel's chairman Sunil Mittal has long called for Arpu to rise to ₹200 and then to ₹300 to enable business sustainability.
"We expect a 20% tariff hike in 2QFY25 and another 10% hike in FY27,” said Jefferies in a note.
Telecom service providers have voiced the need for tariffs to rise. Gopal Vittal, managing director of No. 2 carrier Airtel had said in May that 'substantial tariff repair' was needed across the industry as the current level of tariffs was 'absurdly low'.
Vodafone Idea's CEO Akshaya Moondra has also said last month that a tariff hike was required and that consumers had the ability to absorb any potential increase.