Reliance Jio unlikely to hike tariffs before FY25, ARPU may remain range-bound

As billionaire Mukesh Ambani continues to focus on market share gains in the telecom space, any tariff hike by Reliance Jio is unlikely in FY24, analysts say.
During the June quarter, Jio's average revenue per user or APRU grew 2.8% year-on-year (YoY) at Rs 180.5 due to increased data consumption, improvement in subscriber mix, and rising share of revenues from the home broadband business.

"Hefty network capacity additions with the recent JioBharat launch suggest a higher focus on subscriber gains and do not bode well for tariff hikes. Hence, we change our tariff hike assumptions of 15% hike towards end-CY23 to 20% hike in 2QFY25, which leads to a 3-5% cut to our FY24-26 Arpu assumptions," Jefferies analysts, including Akshat Agarwal said.


Tariff hike is the biggest catalyst for investors in the telecom sector. Jio's ARPU, which has grown from Rs 130 in FY20, is seen growing to Rs 202 in FY26.

Analysts from Kotak Institutional Equities see the possibility of a tariff hike only after the Lok Sabha elections in April-May 2024.

"In our base case, we assume moderate tariff hikes to continue with R-Jio’s wireless ARPU reaching Rs 300 by 2033 (versus Rs 173 at end-FY2023), recording 5.7% 10-year CAGR (versus 10% CAGR over FY20-23). We no longer build in optional value for duopoly explicitly, but with Vodafone Idea’s cash flow constraints, we continue to assume market share gains for R-Jio (7-8 percentage points gain in subscriber/revenue market share over FY2023-33)," Kotak said.

At the post-earnings analyst call, Jio's Anshuman Thakur explicitly mentioned that no tariff increases were enforced during the quarter and the growth in ARPU was led by additional data consumption or an increase in the tariff plans of consumers.

"The monthly data traffic on the Jio network was 11 exabytes, so data consumption continues to be very strong, driven by both 5G as well as some events during the quarter which resulted in higher data consumption. The data consumption was up 48.3% YoY, and that continues to grow every quarter at a very rapid pace, and we continue to see that trend on our network," Thakur told analysts.

The per capita data consumption on Jio increased 20% YoY to 25 GB per user per month.

India's largest telecom operator plans to complete the pan-India 5G rollout by the end of December 2023. Once the rollout is over, capex intensity will moderate and there will be a case to hike tariffs as well.

The newly-launched Jio Bharat phone will drive higher subscriber additions in the coming months as RIL has aggressively priced the phone at Rs 999 and aims to capture a large share of the current 250 million 2G users. "Our industry survey indicated healthy initial demand for the phone versus extant feature phones. We estimate that every 10 m]=n

Bharat phone subscribers at an ARPU of INR123, adds 1% to Jio’s current EBITDA estimates," Nomura said.

While reducing estimates by 3-6% on delays in tariff hikes, Jefferies lowered Jio’s valuations to $58 billion on higher capex.

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