Reliance Jio new plans impact: Reliance Industries stock hits 9-year high; pulls up rivals Airtel, Idea too

Shares of Reliance Industries rose 1 percent today to hit nine-year high at 1,510.50 after investors gave a thumbs up to telecom subsidiary Reliance Jio’s tariff plans announced on Tuesday. The company’s market capitalisation rose by Rs 5,018 crore to Rs 4,91,149 crore and as many as 2.85 lakh shares changed hand on the Bombay stock Exchange. The stock touched an intra-day high of Rs 1,524.50. [caption id=“attachment_3804665” align=“alignleft” width=“380”]  Reuters[/caption] Reliance Jio on Tuesday revamped its Rs 309 plan by reducing the validity and effective data offered. It also unveiled two new tariff plans, including one with 84 GB of data for 84 days for Rs 399. The move comes after Jio’s Dhan Dhana Dhan offer - launched on 11 April – reached the maximum allowed 90-day promotional period on 9 July. Jio will now offer 56 GB of data for 56 days for Rs 309, which effectively means that pre-paid consumers will get 1GB data per day. Earlier, the pack was valid for 84 days for the same amount with 1 GB data per day. According to moneycontrol.com, CLSA has reiterated its buy call for the stock after the company revealed the new plans. “While we await clarity if Reliance will start expensing Jio from Q2FY18, we believe investors will overlook initial losses during promotional periods and focus on subscriber retention and slow monetisation in coming months,” CLSA has been quoted as saying in a note. Meanwhile, rating agency Icra said in a note that Reliance Jio’s revised tariff plans points to uplift in tariffs and improved average revenue per user (ARPU) and thereby is a positive for the telecom industry. The new plans are attractively priced and would keep the competitive intensity for the industry elevated, the rater said. “Although the plans continue to remain attractive for the subscribers, they directionally point to ARPU improvement. As ICRA anticipated earlier, the ARPU levels of the industry would have to improve to sustain the sizeable debt levels and improve return on investments. After amassing more than 100 million subscribers, RJio is now focusing on pushing up the ARPU to improve its profitability,” said Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA. According to Icra, the most prominent plan of the company now is for Rs 399 which offers 1 GB per day of 4G data and unlimited calling for 84 days. This translates into ARPU of Rs 124. Thus the new plan points towards an uptick in ARPU, although it still remain lower than prevailing industry ARPU (Bharti Airtel’s ARPU was Rs 158 for Jan-March and Vodafone’s and Idea’s at Rs 142). “While the competitive intensity of the industry would remain high, the pricing by RJio indicates some easing of pressure on ARPU,” Icra said. The general feelgood is reflecting in the stock market with shares of Reliance Jio’s rivals Bharti Airtel rising 0.44 percent to Rs 397.20 and that of Idea Cellular’s 1.36 percent to Rs 85.50. The Sensex was up 0.18 percent. (Disclosure - Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)