Another round of telecom tariff hikes is on the cards, with a strong buzz of Reliance Jio Infocomm expected to raise them later in the next fiscal year, ahead of its expected initial public offer, according to sources.
Sector leader RJio had set the tariff ball rolling when it raised rates last June, after around two-and-a-half years during which industry rates remained static. It increased the prices of some of its plans by over 25 per cent. The effect has been felt in the financial performance in the last couple of quarters, which saw Jio’s average revenue per user (ARPU) cross the ₹200-mark in the December quarter, though it was lower than what the street had expected. Most of the hike’s impact was felt in the second quarter.
The effects of the tariff hikes are expected to be felt over the current as well as the next quarter. Sources indicated that the hikes will ride on a rising demand for data and a potential listing in the next fiscal year. The company will be looking for a better valuation and pricing for its IPO, as well as any pre-IPO placement.
There was no response to an email sent to RIL seeking clarification on possible tariff hikes.
Lessons from the past
Sources, however, said that tariff hikes may not be as steep as earlier and are likely to be more in the premium segments, in order not to disturb subscriber growth. The hikes last year had led to a muted mobile subscriber growth of 1.3 million in the third quarter, following a decline in the second quarter. In fact the sharp moderation in subscriber addition came as a surprise since Jio had not raised tariffs in the feature phone segment, noted US investment bank Jefferies.
The telecom operator ended the December quarter with a subscriber base of 482 million compared to 479 million at the end of September and 471 million in December 2024.
Despite the tariff hikes, the company saw a 25-basis-points contraction in margin in the third quarter chiefly due to higher opex (operating expense) and sales, and general administrative expenses. Cash returns on capital invested which was at 10 per cent in FY24 will get a boost to 14 per cent in FY27 with the hikes, according to Goldman Sachs.