Reliance Jio’s average revenue per user (ARPU) could reach Rs 250 by FY27 if another round of industry-wide tariff hikes occurs, analysts noted. In Q2FY25, the telecom giant, India’s largest, saw its Arpu increase by 7.4% sequentially to Rs 195.1—the sharpest rise in 10 quarters.
Analysts expect the next round of industry-wide tariff hikes to occur in FY27. Previously, the industry implemented collective tariff increases in November-December 2021 before the latest hikes in July 2024. UBS, in its report, said that the next round of tariff hikes may be prompted by Vi’s need to remain operable.
“If we assume Vi would opt to convert Rs 170 billion of statutory dues into equity in FY27e, then Vi needs to improve Arpu to Rs 200 to meet its statutory payments of Rs 260 billion during FY27e. This implies Vi would need another 10% tariff hike in FY27e. Thus, we now expect an industry-wide tariff hike in FY27e,” UBS analysts stated.
Based on the scenario, the brokerage projects Jio’s mobile Arpu to rise to Rs 238, and its blended Arpu (including home broadband) to reach Rs 251 by FY27. Analysts also expect Arpu to continue climbing as the full impact of the July 2024 tariff hike becomes evident over the next 2-3 quarters.
“Jio has historically taken the longest to show the full impact of tariff increases due to a high proportion of users on 3-month, 6-month, and annual plans,” JP Morgan noted in its report.
Jio’s total subscriber base at the end of September 2024 was 478.8 million, a decline of 10.9 million from 489.7 million at the end of March 2024. The company added 29.8 million gross subscribers in the fiscal second quarter.
“Jio’s overall subscriber decline of 11 million was a key negative surprise from the results. While we expected subscriber additions to slow, we thought Jio would perform better since they did not adjust tariffs for feature phone users,” analysts at Jefferies remarked.
In July 2024, Jio, along with peers Bharti Airtel and Vodafone Idea, implemented tariff hikes across both prepaid and postpaid plans, increasing prices by 12% to 27% across various packages. Jio stated that the price hikes were necessary to improve Arpu, which had stagnated at Rs 181.7 since Q2FY24.
“Arpu benefited from: 1) the tariff hike effective from July 2024, with its impact expected to be fully seen in approximately three quarters; 2) strong growth in the FTTH (Fiber-to-the-Home) subscriber base, which has a higher Arpu compared to mobile subscribers; and 3) growth in the enterprise business,” ICICI Securities highlighted in its post-earnings report on Jio.
“While JIO lost an estimated 12.7mn subs in 2Q in the wake of tariff hikes, healthy ARPU increase suggests that most of the lost subs were low-ARPU ones,” IIFL observed in its report.
Even as Jio’s overall data consumption grew to 45 billion GB (Q1: 44.1 billion GB), analysts said that the mobile data consumption in Q2 took a hit on account of loss of subscribers.
“Mobile + FTTH data traffic grew 2% q-o-q. With the average data usage per FTTH sub above 300GB/month, we estimate that mobile traffic declined 4% q-o-q to 344PB/day, (a) sharp decline versus 6.5% growth in 1Q,” analysts from IIFL added.
The telco added 1.8 million home connections in Q2 through its wired and fixed wireless access offerings, and has set itself a goal to add 3 million a quarter going forward to meet its target of reaching 100 million homes. Jio’s home broadband base currently stands at 2.8 million.
“Premiumisation would have also aided ARPU as 5G services are now available with 2GB or above data allowance pack per day. RJio 5G subs crossed 148 million (net add: 18 million) who are enjoying free data on 5G network,” ICICI Securities added. Jio’s 5G users accounted for 34% of the data consumption in the quarter.
From: financialexpress
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