Shares in Indian wireless operators rose sharply on Oct 23 after Reliance Industries Limited’s Jio telecom unit increased mobile data tariffs, raising hopes of an easing in the cut-throat competition that has eroded profits in the sector.
Top-ranked Bharti Airtel Limited rose to a more than eight-year high and Reliance hit a record on the first day of trading since Jio’s announcement last week of new high-end data tariffs that effectively raise prices by as much as 20 per cent.
Jio, backed by India’s richest man Mukesh Ambani, has up-ended the world’s second-biggest mobile services market by users with aggressive marketing and by slashing prices for its 4G data, forcing established players including Bharti Airtel and Vodafone’s local unit to match the offerings.
As a result, Bharti Airtel posted a 75 per cent drop in its April-June profit while Idea Cellular Limited reported a third consecutive quarterly loss.
Analysts said Jio’s prices remain low, although they welcomed the hikes as a good initial signal of more pricing discipline.
“Jio’s announcement last week was a huge relief for all incumbent players as there is a feeling that the worst of pricing is behind them,” said Satish Betadpur, director of research at William O‘Neil & Co.
“Reliance is looking at making sure Jio is profitable. My guess is that from now on, they will focus on quality of network to get more customers,” he added.
The energy conglomerate said on Oct 13 that Jio would turn profitable “shortly” after the telecom unit posted a loss of Rs 2.71 billion.
Reliance shares jumped as much as 3.8 per cent on Oct 23 to hit a fresh all-time high, before closing 3.3 per cent higher.
Bharti Airtel led gains on the broader NSE index, climbing as much as 5.8 per cent to hit its highest level since May 2009.
Idea Cellular Limited surged as much as 8.8 per cent to touch its highest since July 25, while Reliance Communications Limited rose as much as 9.5 per cent.
Jio’s tariff plans included a mix of price hikes or reduced benefits, such as charging 15 per cent more for an 84-day plan that offers users up to 1 gigabyte of 4G data per day, and reducing the validity for its 399 rupee pack to 70 days from 84 days.
