Tariff Hike To Boost Vodafone Idea’s EBITDA By 70%; What About Reliance Jio?

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Tariff Hike To Boost Vodafone Idea’s EBITDA By 70%; What About Reliance Jio?
Credit: © Reuters.

By Malvika Gurung

Investing.com -- Shares of the cash-strapped telecom service provider Vodafone Idea (NS: VODA ) closed Wednesday’s session 2.83% higher at Rs 10.9 apiece, after surging over 5.3% intraday. The surge in the telco’s stock comes a day after Vi announced to increase its prepaid tariffs by 20-25%, starting November 25, to increase its average revenue per user (ARPU) and address the financial stress faced by the industry.

Vodafone (LON: VOD ) Idea’s decision to hike prepaid tariffs by 20-25% is seen as a positive step towards the debt reduction of the company, as analysts predict a jump of about 70% in the telco’s operating income and a 14% surge in its revenue for the ongoing financial year.

They believe that the price hike will improve the telco’s cash flows, indicating near-term financial improvements in the company’s health, essential for the telco to invest in expanding its 4G network for competing against rivals, Reliance (NS: RELI ) Jio and Bharti Airtel (NS: BRTI ).

Brokerage CLSA expects the telco’s price hike to boost its revenues by a total of 17%, while Motilal Oswal (NS: MOFS ) estimates an increase in revenue by 14% to Rs 55 billion, and by 68% to Rs 38 billion in EBITDA. It adds that the price hike could push Vi’s ARPU up from Rs 109 (current) to Rs 128 in the ongoing FY.

Besides, analysts expect Reliance Jio to announce tariff hikes of 20% before Nov 26. Price hikes of even 20% by the telco, would manage to preserve its 15-20% discount to Airtel or Vi’s prepaid plans that are almost identical, states IIFL.

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  • Niranjan Sonawane @Niranjan Sonawane
    Jio should not hike now… let the dust settle and allow to migrate more then eise in next quarter
    Like 0

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