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Reliance Jio to hike tariffs: Is this the end of honeymoon period for consumers?

Mukesh Ambani-led Reliance Jio aims to increase revenues, augment average revenue per user (ARPU) and fund investments in its 4G and 5G infrastructure

twitter-logo BusinessToday.In   New Delhi     Last Updated: November 20, 2019  | 14:55 IST
Reliance Jio to hike tariffs: Is this the end of honeymoon period for consumers?
Mukesh Ambani-led Reliance Jio to hike tariffs in coming weeks

Reliance Jio announced on Tuesday that it will hike its tariffs in a few weeks. While the company did not state the quantum of tariff hikes, it has followed the footsteps of rivals Vodafone Idea and Airtel in announcing an increase in their prices. The telecom operator had also announced additional IUC charges last month. This could spell the end of the honeymoon period for its customers as the Mukesh Ambani-led telecom operator aims to increase revenues, augment average revenue per user (ARPU) and fund investments in its 4G and 5G infrastructure.

Reliance Jio stated in a regulatory filing on Tuesday: "As per media reports, we understand that TRAI is likely to initiate a consultation process for revision of telecom tariffs. Like other operators, we will also work with the government and comply with the regulatory regime to strengthen the industry to benefit Indian consumers and take measures including appropriate increase in tariffs in next few weeks in a manner that does not adversely impact data consumption or growth in digital adoption and sustains investments."

Last month, Reliance Jio announced that it would levy an additional charge of 6 paise per minute as IUC charges as, it claimed, it paid Rs 13,500 crore to other operators as IUC charges in three years. IUC charges are calling-party-pays tariffs that mean that the network from which the call originates would have to pay IUC charges to the called network. In the wake of this, Reliance Jio decided to pass on the IUC burden to the customers.

Also read: Reliance Jio takes cues from rivals, to hike tariff in few weeks

The company asked its subscribers to buy top-up recharges on their existing plans or to pick all-in-one packs alternatively. The latter have off-net call minutes bundled in them.

However, this is the contrast to what Reliance Jio had promised during its launch. It had emphasised that "domestic voice calls to any network across the country would always be free for Jio subscribers". Jio has, moreover, also assured that the IUC charges would remain effective only till TRAI abolishes them. 

One of the biggest factors that propelled Reliance Jio to become one of the top three telecom operators in the country was its disruptive pricing. With dirt cheap prices on offer, customers flocked to Reliance Jio as its rivals failed to keep up with the tariffs. According to the latest TRAI data, Jio recorded 35.52 crore users in September after it added 69.83 lakh users in the same period. Its rivals Bharti Airtel and Vodafone Idea both lost users in September. TRAI data stated that Airtel lost 23.8 lakh users, while Vodafone Idea lost 25.7 lakh users.

Also read: IUC tussle: It's incumbents versus Reliance Jio; key takeaways

The company that reported a surge of 45.4 per cent in its net profit for the quarter ended September 30 is also aiming to increase its ARPU. Its net profit was reported at Rs 990 crore in Q2. Its EBITDA for September was up 44.6 per cent from Rs 3,573 crore in Q2 the previous year to Rs 5,166 crore this Q2. Its ARPU, however, dipped to Rs 120 per user per month from Rs 122 per user per month for the same period last fiscal.

Mukesh Ambani also plans to make Reliance Jio net debt-free by March. Reliance Industries has created a subsidiary to bring together all the digital and mobility businesses under the new entity. The parent company has decided to pump in Rs 1.08 lakh crore to clear off the debt, with RIL already investing Rs 65,000 crore in the subsidiary. 

The new subsidiary - a direct subsidiary of RIL - will become the parent of Reliance Jio Infocomm Ltd as well as of apps like MyJio, JioTV, JioCinema, JioNews and JioSaavn, besides content generation ventures.

However, not only Reliance Jio, rivals Vodafone Idea and Airtel also announced that it will hike its tariffs from December 1. In the midst of changing tariffs and regulations, consumers who benefitted from the fierce price war between the operators would now have to bear the brunt of increased tariffs.

Also read: Reliance Jio breaks its promise; to charge for calls to rival networks

Also read: Mukesh Ambani's Reliance Jio tops market with 31.7% revenue share in June quarter; Airtel in 2nd spot

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