Vodafone Idea, Bharti Airtel shares: Jio Prime eyes peer subscribers; targets

Nomura in its fresh note on telecom sector said Bharti Airtel Ltd chose aggressive plan rationalisation, which could rattle its existing users. For now, it said Jio has gone for a subscriber growth strategy by offering protection against hikes, while Vodafone Idea Ltd continued to be wait-and-watch mode. Nomura said a tariff hike is more likely after Jio Prime launch.

To recall, on August 17, Jio offered price protection against any future tariff hikes to every user who purchases its newly-launched one-time Jio Prime membership, costing Rs 300.

Jio has explicitly said that its Rs 299 per month plan will remain available, unless there is an across-the-table tariff hike. Jio's Prime subscribers can lock in existing plan prices till September 5, 2027. This, Nomura said, is a hard expiry date and does not depend on the date of purchase of Prime membership.

Nomura said Jio Prime is a direct response to Airtel’s tariff rationalisation, and is aimed at retaining its own existing subscriber base by giving them tariff guarantee and charging Rs 25 per month in return. It is also targeting Airtel’s entry-level subscribers who are unwilling to pay an additional Rs 50 per month, the next cheapest daily unlimited plan after the Rs 299 per month plan discontinuation.

"The Prime membership also provides a one-time Rs 300 voucher to be used to port a friend/family from another network (directly aimed at Airtel’s Rs 299/month customers, we think). Even if only 10 per cent of Airtel’s customers from the discontinued plans move to Jio, there will be net subscriber gain of 69 lakh (1.3 per cent of Jio’s current subscriber base), in our view," Nomura said.

The foreign brokerage said Vodafone Idea may be willing to wait to see the impact of Airtel’s plan rationalisation on its subscriber base over the next couple of months.

If Airtel manages to upgrade its Rs 299 subscriber base to Rs 349 without much churn, Vodafone Idea will likely decide to respond with a similar rationalization move and capture the ARPU uplift.

However, if the churn is high, Vodafone Idea will likely need to respond via a commitment of tariff protection, similar to Jio Prime,  to gain a pie of Airtel customers who decide to port out.

"Given VI’s stressed balance sheet, we believe it cannot afford to lose subscribers, and also needs to increase its ARPU as soon as possible, forcing it to walk a tight-rope," Nomura said.

Top telecom pick 
Nomura forecast 14 per cent growth in consolidated Ebitda CAGR for Bharti and Reliance Jio over FY26-29 underpinned by a likely tariff hike of 15 per cent during the December quarte. IT sees a slightly higher 15 per cent Ebitda CAGR for Vodafone Idea on a lower base amid improving operating metrics.

"Bharti remains our top pick among the telecom stocks under our coverage," Nomura said.

For Bharti Airtel, Nomura has a target of Rs 2,360. It has a target of Rs 13.50 on Vodafone Idea.