Reliance Jio’s tariff hike suggests worst may be over for telcos
While the December quarter is expected to be the worst for telcos in years, it may end up being the nadir as far as profitability goes
Reliance Jio’s slow but steady tariff increases suggest things are likely to improve from hereon on the profitability front. Graphic by Subrata Jana/Mint
Reliance Jio Infocomm Ltd has hiked tariffs for its flagship scheme by about 15%, lower than the 26% and 36% increase on the previous two occasions. Not that incumbents will be complaining. They have been reeling under the triple whammy posed by Jio’s cut-throat competition, the impact of goods and services tax, or GST, and a 57% cut in interconnection usage charges (IUC).
In fact, when the Telecom Regulatory Authority of India, or Trai, had announced the cut in IUC last month, one worry among some investors was that Jio may use the resultant savings—Jio ran an IUC bill of more than Rs2,100 crore in the September quarter—to cut tariffs. In this backdrop, Jio’s tariff hike comes as a relief for incumbents, as it will help increase revenues and limit losses.
So while the December quarter is expected to be the worst for telcos in years, it may end up being the nadir as far as profitability goes.
Jio’s slow but steady tariff increases suggest things are likely to improve from hereon on the profitability front.
Of course, it’s another matter whether telcos—the ones that survive—will make a respectable return on their investment.
In fact, when the Telecom Regulatory Authority of India, or Trai, had announced the cut in IUC last month, one worry among some investors was that Jio may use the resultant savings—Jio ran an IUC bill of more than Rs2,100 crore in the September quarter—to cut tariffs. In this backdrop, Jio’s tariff hike comes as a relief for incumbents, as it will help increase revenues and limit losses.
So while the December quarter is expected to be the worst for telcos in years, it may end up being the nadir as far as profitability goes.
Jio’s slow but steady tariff increases suggest things are likely to improve from hereon on the profitability front.
Of course, it’s another matter whether telcos—the ones that survive—will make a respectable return on their investment.
Comments
Post a Comment