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Increased rates drive 5G monetisation for Jio and Airtel: Analysts

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In Short:

Reliance Jio, India’s largest telecom company, is increasing prices for 5G services by 46% to focus on monetization rather than adding new subscribers. This move is expected to increase blended average revenue per user for Jio and Bharti Airtel. The company is encouraging users to upgrade to higher-tiered plans for increased data allowance. Despite the price hike, Jio continues to focus on adding subscribers, especially in the feature phone segment.

Reliance Jio Leads in Monetizing 5G Services with Price Increase

Market experts have noted a significant shift in strategy by India’s largest telecom company, Reliance Jio, towards premiumization rather than subscriber addition. This shift has been marked by a 46% increase in prices for 5G users, driving a boost in average revenue per user (ARPU).

Experts’ Estimates

Morgan Stanley estimates that Jio and Bharti Airtel could see a blended ARPU benefit of 16-17%. Axis Capital predicts tariff-to-ARPU transmission to range between 50-70%.

Analysis and Opinions

JP Morgan stated that Jio’s focus has shifted towards monetization, resulting in a premiumization of 5G access. This move has led to a 46% increase in tariffs for 5G users. Axis Capital mentioned that 5G monetization is being achieved by encouraging users to upgrade to tiered plans with increased data allowances.

Impact on Subscribers

Previously, Jio offered unlimited 5G to subscribers opting for the 1.5GB/day plan. Now, this benefit is available to those choosing the 2GB/day plan or higher, costing Rs 349 or more. BNP Paribas noted that this effectively adds Rs 50 to the cost of 5G.

Telco Strategies

Despite not raising prices for the featurephone segment, Jio has seen a rise in active subscribers. Jefferies believes that the focus on monetization could lead to an imminent listing for Jio.

Industry Outlook

Bank of America (BofA) Securities predicts that the recent tariff hikes are unlikely to result in significant SIM consolidation. They anticipate a lower negative impact this time due to data stickiness and consumer behavior.

New Tariff Plans

Jio has announced new tariff plans effective from July 3, 2024. The prepaid plans will see a 13%-25% increase, postpaid plans will be 13-17% higher, and add-on data plans will cost 13%-27% more.

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