Average tariff hikes of 15-20% by all the players to drive ~25% EBITDA growth in FY25E

· RJio was the first among its peers to initiate an average price hike of ~19%, and it was followed by Bharti and VIL (with hikes of ~15 and ~16%, respectively). All the players have announced the tariff increase for both prepaid and postpaid plans. However, RJio has not raised the tariff for JioBharat/JioPhone users.

· Bharti and VIL have taken modest price hikes of ~11% each in the entry-level plans to restrict subscriber churn in 2G and 17-18% in the popular plans (vs. RJio’s ~19% hike). Still, RJio remains the affordable plan provider with the highest spectrum that supports its offerings of quality services at the lowest price.

· The price hikes remain in line with expectations, and will increase the exit ARPU of FY25 by 17%/20%/20% to INR213/INR251/INR175 for RJio/Bharti/VIL supported by the organic ARPU growth. The ARPU increase will be spread out in 2-3 quarters and may translate into a 26%/24%/26% increase in EBITDA for RJio/Bharti/VIL.

· The gap between RJio and Bharti/VIL contracted in value plans/ entry-level plans as Bharti/VIL’s price hikes were lower to protect their 2G subscriber base, which is 25%/40% of their total subscribers. However, the gap in premium/postpaid plans between RJio and Bharti/VIL remains the same.

· Overall, a tariff hike after two years is a positive step for the telecom industry, as this will provide a breather for VIL and improve return ratios for Bharti/RJio. However, with the increase in tariff alongwith higher mobile number portability (MNP) at 11-12% of the gross industry subscribers we expect some down trading and SIM consolidation going forward.

· After the tariff hikes, we expect the catalysts for the telecom stocks would be subscriber gains, a reduction in churn, 5G adoption and an increase in data customers.

· We continue to prefer RJio and Bharti (TP of INR1,680) and we reiterate our Neutral rating on VIL with a TP of INR18.

Bharti/VIL have reduced pricing premium vs. RJio in entry level plans; maintained in premium plans

· The average price hikes taken by Bharti stood at ~15%, VIL at ~16%, and RJio at ~19% across both the prepaid and postpaid plans.

· Bharti and VIL have taken modest price hikes of ~11% each in the entry-level packs (this could help them retain their 2G customers), while they have raised prices by ~17% in popular plans. RJio took a price hike of ~20% across entry and popular plans.

· After the price hikes, the gap between Bharti/VIL and RJio in entry-level plans reduced to ~5% vs. ~15% before the price hikes.

· In prepaid, the price gap between Bharti/VIL and RJio remained the same in popular daily plans as compared to the previous scenario (8-10%).

· Similar to RJio, Bharti/VIL also took price hikes in the postpaid plan by ~15%, and thus they maintained the price gap with RJio.

· The new plans will be effective from 3rd Jul’24.

· RJio is also launching: a) JioSafe – the quantum-secure communications app for calling, messaging, file transfer, and more (priced at INR199/month), and b) JioTranslate – an AI-powered multi-lingual communication app for translating voice calls, voice messages, texts, and images (priced at INR99/month).