Shares of Reliance Industries have hit the jackpot on the bourses in early trade Wednesday, after investors cheered the company's move to end free telecom services on its Jio platform and start charging customers beginning 1 April.
Following the announcement on Tuesday, RIL stock today notched up significant gains in early trade, surging over 7.5 percent to touch a high of Rs 1,170.50 - a 8-year high last touched in June 2009.
At 10.25 AM, RIL stock was traded at Rs 1,165.90 a share on BSE, up 7.1 percent or Rs 77.75 higher over its previous close of Rs 1,166.
Neary 12 lakh shares have changed on BSE in the first hour of trade as against two-week average volume of just 2.18 lakh shares.
Stock market analysts are upbeat about the company's stock prospects in the near to medium term after Mukesh Ambani on Tuesday in an announcement stated that Reliance Jio, the company's telecom arm, will end its free services on 31 March, and would start charging customers beginning 1 April.
"The company's decision to start charging customers from 1 April has led to clarity in the sector, which was missing for some time. There were earlier concerns that RIL may extend its free services to customers for 4-6 months to acquire customers. However, the decision to end will mean cash will flow to the company after having spent a huge capex on it for last 7-8 years," said AK Prabhakar, head of research, IDBI Capital Markets Services Ltd.
Announcing the tariff plans yesterday, Ambani unveiled Jio Prime service that will be opened for registrations between 1 March and 31 March. Customers can avail this at a joining fee of Rs 99 and Rs 303 monthly charges. This works out to Rs 10 per day. Also, all domestic voice calls to any network will remain free, with no roaming charges and unlimited data.
The existing subscribers who opt for Jio Prime will continue to get the Jio New Year offer benefits for one more year until 31 March 2018.
"We are grateful to everyone who believe in us," Ambani said announcing the plan.
He also said more value plans will be announced for Jio Prime members soon and details will be on My Jio app.
"With 10 crore customers under its belt, even a minimum tariff plan will translate into huge revenue earnings for the company to start with. Within a short period of time, Reliance Jio has reached economies of scale," said Prabhakar.
IDBI Capital Market has set the target of Rs 1,219 for Reliance Industries, and indicated that the target price could be raised sooner.
With consolidation in the telecom space gaining momentum, pricing power will soon return for the top telecom players as the recent spate of merger announcements and proposals would lead to three or four big players in the sector in next few years, said Prabhakar.
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Updated Date: Feb 22, 2017 11:08:12 IST