Rate hikes for 5G monetisation to push Jio, Airtel ARPU by 16-17% - Analysts
Agencies
Synopsis
Reliance Jio emphasizes 5G monetization and premium plans, focusing on ARPU growth. With new tariff plans boosting prices, the telco aims for strategic revenue enhancement. Balancing subscriber additions and network monetization, Jio navigates the evolving telecom landscape with confidence, while industry competition and market dynamics drive further strategic decisions.
By Himanshi Lohchab, ET Bureau
India’s largest telecom company Reliance Jio has taken the lead in monetising 5G services by driving a 46% increase in prices for 5G users, marking a sharp shift in its strategy towards premiumisation rather than subscriber addition, market experts said.
According to Axis Capital tariff-to-ARPU transmission could be between 50-70%.
“..its focus has shifted from share gains to monetization,” brokerage firm JP Morgan said in its stock update. “Jio premiumised 5G access by increasing the threshold for unlimited 5G data to 2GB/day plans from 1.5GB/day plans that effectively drives a 46% increase in tariffs for 5G users, 2x the overall hikes driving 5G monetization.”
Axis Capital said “5G monetization is not happening through differential pricing but by encouraging users to move up in tiered plans by offering increasing data allowance.”
With penetration of 5G users rising to 22% for Jio and 28% of Airtel’s 4G subscribers, we had expected telcos to start monetizing it, it added.
Earlier, Jio was offering unlimited 5G complimentary to subscribers opting for its 1.5GB/day plan priced at Rs 239 for 28 days or higher. This benefit will now be available to consumers opting for the 2GB/day plan costing Rs 349 or higher. Effectively, 5G will cost Rs 50 extra, BNP Paribas said.
“Jio's limited participation in the spectrum auctions this week suggests that its focus on network monetization is rising and its initiative on raising tariffs suggests that it is more confident that its subscribers are unlikely to churn out. Rising focus on monetization could also be a precursor to its imminent listing,” brokerage firm Jefferies said.
However, the telco has not increased prices for the featurephone segment (JioBharat) despite Airtel’s sharp increase in voice tariffs.
“Over Apr-23 to Apr-24, Reliance Jio has added 26m active subscribers as against 19m additions for the sector. This has been partly driven by the new feature phone offering (JioBharat) last year,” Jefferies said in its report.
Therefore, we believe Jio's continues to focus on further subscriber additions, it added.
This round of tariff hikes by telecom companies is unlikely to cause large SIM consolidation, Bank of America (BofA) Securities said.
Reliance Jio on Thursday announced new tariff plans which will be effective from July 3, 2024. The new prepaid tariff plans are 13%-25% higher versus previous plans, postpaid plans are 13-17% higher, and the add-on data plans are 13%-27% more expensive.
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Morgan Stanley estimates that Jio and Bharti Airtel would record a blended ARPU (average revenue per user) benefit of 16-17%.According to Axis Capital tariff-to-ARPU transmission could be between 50-70%.
“..its focus has shifted from share gains to monetization,” brokerage firm JP Morgan said in its stock update. “Jio premiumised 5G access by increasing the threshold for unlimited 5G data to 2GB/day plans from 1.5GB/day plans that effectively drives a 46% increase in tariffs for 5G users, 2x the overall hikes driving 5G monetization.”
Axis Capital said “5G monetization is not happening through differential pricing but by encouraging users to move up in tiered plans by offering increasing data allowance.”
With penetration of 5G users rising to 22% for Jio and 28% of Airtel’s 4G subscribers, we had expected telcos to start monetizing it, it added.
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Earlier, Jio was offering unlimited 5G complimentary to subscribers opting for its 1.5GB/day plan priced at Rs 239 for 28 days or higher. This benefit will now be available to consumers opting for the 2GB/day plan costing Rs 349 or higher. Effectively, 5G will cost Rs 50 extra, BNP Paribas said.
“Jio's limited participation in the spectrum auctions this week suggests that its focus on network monetization is rising and its initiative on raising tariffs suggests that it is more confident that its subscribers are unlikely to churn out. Rising focus on monetization could also be a precursor to its imminent listing,” brokerage firm Jefferies said.
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However, the telco has not increased prices for the featurephone segment (JioBharat) despite Airtel’s sharp increase in voice tariffs.
“Over Apr-23 to Apr-24, Reliance Jio has added 26m active subscribers as against 19m additions for the sector. This has been partly driven by the new feature phone offering (JioBharat) last year,” Jefferies said in its report.
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Therefore, we believe Jio's continues to focus on further subscriber additions, it added.
This round of tariff hikes by telecom companies is unlikely to cause large SIM consolidation, Bank of America (BofA) Securities said.
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“Historically we have seen some SIM consolidation and negative elasticity impact post tariff hikes. While anticipate a similar negative impact this time as well, we think the magnitude of the impact may be lower this time around. This is because the larger part of SIM consolidation is already behind us and data is getting sticky such that consumers may not downgrade as much,” it said.Reliance Jio on Thursday announced new tariff plans which will be effective from July 3, 2024. The new prepaid tariff plans are 13%-25% higher versus previous plans, postpaid plans are 13-17% higher, and the add-on data plans are 13%-27% more expensive.
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