Vodafone India Ltd’s (VIL) 6-9 per cent post-paid tariff hike looks more like a signalling mechanism for a broader tariff hike, according to a report by brokerage firm Credit Suisse.
With the current tweaks, VIL has bridged the gap with Reliance Jio Infocomm’s (RJio) post-paid tariffs in the ₹799 bucket and is at an 8 per cent premium in the ₹649 bucket. However, the sustainability of the hike would depend on RJio’s participation, it said.
VIL has raised tariffs on two of its post-paid plans to ₹649 from ₹598 and to ₹799 from ₹749, respectively.
“VIL has been keen to raise tariffs and had already expressed willingness to take the lead on raising tariffs, given its precarious cash flow situation. Further, the company is in the middle of the fund raise (debt and equity) and a tariff hike could help generate interest from investors. In our view, this is an attempt by VIL to test the waters for the next round of tariff hikes across the board,” it said.
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Quite intuitively, Bharti Airtel has also indicated that tariff hikes would depend on RJio’s participation, as it otherwise runs the risk of losing subscribers. However, there is limited incentive for RJio to raise tariffs immediately, especially given the fact that the pace of its net customer additions has slowed over the last few months.