What tariff hikes mean for Reliance Jio, Airtel & Vi

Bharti Airtel and Reliance Jio Infocomm could gain an extra ₹7,500 crore each in free cash flows (FCF) annually after the latest round of prepaid tariff hikes and keep growing market share at Vodafone Idea's (Vi) expense, said analysts.

The price hikes are expected to boost Bharti Airtel and Jio's average revenue per user (ARPU) by ₹25 and ₹20 respectively by March 2022 from ₹153 and ₹144, respectively, reported in the second quarter of the financial year. Vi's ARPU, by contrast, is estimated to rise by ₹5 to ₹114 by March-end as the cash-strapped telco has been unable to ramp up data networks and push its low-revenue generating feature phone users to go 4G.

On Sunday, Jio too raised prepaid tariffs by 20-21 percent, effective December 1, following similar price hikes by Bharti Airtel and Vi last week amid efforts to garner more revenue from their customers.

Vodafone Idea shares rose 4.3 percent to ₹11.3 in late trade on the BSE, a day after Jio raised its rates. Market analysts said it became clear that the cash-strapped telco, as well as Bharti Airtel, would not see any incremental subscriber churn, with the entire industry pricing curve moving up uniformly by about 20 percent across buckets and the quantum of discount on Jio's plans versus its rivals remaining unchanged at about 13 percent. Bharti Airtel stock was up 0.3 percent at ₹739.35.

Shares of Reliance Industries, Jio's parent, rose 1.4 percent to ₹2,447.

"The recent price hikes will result in annual FCF increases of $1 billion for Bharti/Jio, who will (also) continue to gain market share from Vi" as the latter's "Capex has been less than 50 percent vs that of Bharti over the last 3 years", Goldman Sachs said in a report.

The higher FCF, it said, is estimated to result in Bharti (wireless) and Jio's operating income growing at 38 percent and 32 percent compounded respectively, annually between FY21 and FY24.

Jefferies estimates Jio's ARPU to grow to ₹172 by FY24 and has raised the FY22-24 revenue, Ebitda, net profit estimates by 5-23 percent on the back of the higher estimated revenue from each of its users. It also expects Jio to deliver 18-31 percent growth in revenue and profits compounded annually over FY22-24 and raised the market leader's valuation by 8 percent to $96 billion.