Bharti Airtel hits 10-year high as telecom stocks surge after Jio hikes tariffs

Almost all the telecom stocks on Tuesday were trading in the green after Reliance Jio increased its tariffs which will in turn increase its average revenue per user by up to 20 percent. This is a positive for the telecom sector which is seeing rapid consolidation. Reliance Jio made its service dearer by about 15 percent for its popular 84-day plan at Rs 459 from October 19, under which subscribers get 1GB 4G data at high speed per day.

Shares of Bharti Airtel rose 0.7 percent and was trading at Rs 500.85 per share while Idea Cellular added 0.36 percent, trading at 98.45 per scrip. However, Reliance Communications was trading at 3.67 percent lower while on the other hand Tata Communications rose 1.39 percent and was trading at 727.45 per share.

According to a Credit Suisse report, the new tariffs of Jio are still 65 percent lower than an average smartphone customer was paying before its launch which would continue to put pressure on average revenue per user (ARPU) of incumbents.

Research firm Philip Capital feels that Reliance Jio by reducing validity on the most popular Rs 399 plan to 70 days from 84 days will result in effective ARPU increase by 20 percent. The earlier Rs 399 plan with 84 days validity is now available for Rs 459 entailing a 15 percent ARPU increase. Thus effective ARPU will rise by 15-20 percent for Jio subscribers on the most popular plans.

According to the brokerage, Airtel has “very good chance of maintaining its market leadership position” as the Mittal-owned telco succeeded in its strategy to gain customers via mergers, effectively counter Jio, and gain market share from incumbents.

"The Indian telecom industry is seeing a huge amount of consolidation and with decreasing choices for the subscribers, the operators will compete on quality of service over the medium to long-term. This could mean a sustained increase in ARPU over the medium to long-term. We are highly optimistic about the prospects of the Indian telecom industry," it said.

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