Reliance Jio’s New Tariff Plans Still Cheaper Than Peers’

Reliance Jio Infocomm Ltd. hiked tariffs in new prepaid plans. Yet, they are cheaper than incumbent peers.

The Mukesh Ambani-controlled carrier introduced new “all-in-one plans” on Wednesday, a few of them at a premium of 8 percent to 34 percent over its earlier plans. In comparison, Bharti Airtel Ltd. and announced new prepaid plans wherein calls and data tariffs are higher by up to 42 percent and Vodafone Idea Ltd. hiked prices by up to 16-50 percent.

But like Bharti Airtel and Vodafone Idea, Reliance Jio's plans, too, will have a cap on the minutes of outgoing calls. And though Reliance Jio said its new plans provide up to 300 percent more benefits, the discount gap between the plans of Ambani's venture and peers has reduced.

On Oct. 10, India's fastest growing telecom operator introduced interconnect usage tariffs, charging users for outgoing calls. Before the introduction of cross-network call charges, Reliance Jio's plans were about 25 percent cheaper than peers. That gap now has narrowed to 20 percent.

Reliance Jio's plans are effective Dec. 6, while those of Bharti Airtel and Vodafone Idea from Dec. 3.

Here's what the brokerages have to say…

Goldman Sachs

• Reliance Jio's tariff changes broadly in line.
• Tariff saw an average increase of 27 percent for monthly plans and 36 percent for three-month plans.
• Expects Rs 37 incremental ARPU for Reliance Jio; Rs 24-27 for Vodafone Idea and Bharti Airtel.
• Reliance Jio is the biggest beneficiary; low risk of down-trading.
• One tariff hike done but more could come.

Morgan Stanley

• Tariff plans with an average increase of 32 percent over its previous prepaid plans not including the additional top-up for IUC on off-net outgoing calls.
• For some of the key plans, the premium of Bharti Airtel and Vodafone Idea over Reliance Jio has come off now.

JPMorgan

• Maintains ‘Neutral' for Reliance Industries with a target price of Rs 1,565 apiece.
• New tariff plans are 7-13 percent lower than incumbents.
• Hikes may not flow through the March quarter given implementation from Dec. 6.
• Subscriber addition growth could slow down for Reliance Jio.

CLSA

• Maintains ‘Buy' for Reliance Industries and hikes target price to Rs 2,010 apiece from Rs 1,710.
• Reliance Jio's new tariffs at 7-20 percent discount to incumbents; Ebitda to rise by $1.1-1.3 billion.
• Strong near-term quarterly profit due to new shipping fuel norms and tariff hikes; raise EPS estimates by 1-8 percent.

Goldman Sachs

• Maintains ‘Buy' on Reliance Industries and hikes target price to Rs 1,850 apiece from Rs 1,635.
• Expects stronger growth in the telecom business driven by a higher ARPU from potential tariff hikes, coupled with continued strong subscriber addition momentum.
• Gross refining margins set to accelerate due to International Maritime Organization's shipping fuel norms to be implemented from January 2020.
• Expects significant improvement in free cash flow and asset monetization, leading to deleveraging.