Jio To Follow Bharti & Vi In Taking Tariff Hikes
Yesterday’s Market Performance
Nifty: 17,415.05 | -88.30 (-0.50%)
FII Net Sold: INR 5,122.65 crore
Sensex: 58,340.99 | -323.34 (-0.55%)
DII Net Bought: INR 3,809.62 crore
Howdy Toasters!
In today’s issue of the Morning Toast, we discuss:
- Jio to follow Bharti & Vodafone Idea in taking tariff hikes?
- Nifty50’s time to recover?
- An education concept to keep you chugging along
Jio to follow Bharti & Vodafone Idea in taking tariff hikes? What’s up and What do you need to know? 📉🐱🏍
Bharti Airtel
- Bharti Airtel surprised the markets by taking the lead in the much-anticipated tariff hike across all prepaid plans, executing a 20-25% increase (vs 18% forecasted by Bloomberg), with the entry level plan seeing the highest jump
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The revised tariffs, which will come into effect from November 26, will be the third leg of price increases taken by the company, following the hikes in postpaid and minimum recharge plans in July
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Majority of tariff increases were undertaken in the prepaid segment (~85-87% of India wireless revenues), with the base tariff seeing a 25% jump (up to INR 99 from INR 75)
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The company undertook a uniform 20% hike across the most popular 1.5 GB / day plan (indicative of the confidence), while similar other prepaid offerings (2.5 GB / day) saw hikes of 20 / 22%
- Similar to Bharti, entry level prepaid offering saw the highest increase of 25%, followed by similar 20 / 22% hikes across the 1 GB / day and 2.5 GB / day plans
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The company executed a blanket 20% hike across most prepaid offerings (following on Bharti), with new plans applicable starting November 25
Interesting! Are you selling me their plans? Give me something substantial? (Loll) 😜
- Taking into consideration the quality of Bharti’s subscriber base (upper end of pay scale), absorption of these tariff hikes should not be a major concern
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Likewise, past hikes (December 19 and July 21) have resulted in minimal subscriber churn, and an emulation by both competitors, i.e. Vi & Jio (belatedly), making Bharti a price-maker in the market
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However, looking at the current inflationary scenario, subscribers may continue to assign a fixed monthly output value, in which case churn (recorded over Q3FY22 – Q1FY23) can be expected
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From Vi’s perspective, the passing of tariff hikes is key to maintaining any semblance of a functioning business, with any opportunity duly obliged
And Jio? (Beautiful question :P) 🤩
- India’s largest telecom player (by number of subscribers) continues to offer its most recent festive 20% cash-back offer scheme on 3 popular plans, with no clear noises permeating from the company with regards to tariff hikes
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In the past, the company has followed suit in maintaining a 12-25% price differential (on the cheaper side, duh!) to its competitors, with a similar move expected in the coming days
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In-case a tariff hike isn’t forthcoming, ensuing price differential can be hugely negative for Bharti (with Jio out-smarting its largest competitor), leading to potentially massive subscriber churn (for Bharti & Vi)
- The market was enthused (to say the least); Bharti stock was up ~5% on the day of the announcement (Monday, 22nd November) which was also the day broader markets were down ~2%
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RIL stock has been under pressure, more so because of a breakdown in the Aramco deal which is likely to affect O2C margins in the near term
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Tariff hikes are key for longer term stability (across the industry), with Average Revenue per Users (ARPUs) likely to inch up for all players, yet Jio (being Jio) is bound to keep the market jittery, till we know more
All eyes on Jio’s next move?
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- Analyzing Nifty50 on a weekly time-frame (over 60 weeks), indicates that the benchmark index has been in a constant uptrend (see image below)
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The index has been breaking earlier highs and making new ones (HH) over 2020 & 2021, while taking support at a rising trending (thus making higher lows)
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Nifty, after correcting 6.4% from it’s all-time high (18,604.4), has now shown a corrective decline (last 5 weeks) resulting in the prices trading close to the rising trendline.
Awesome! Can we look for any more price action confirmations? What other tools can we use? (We got you my man)🧐
- Looking at the chart on a daily time-frame, prices have been trading between 2 parallel falling trend lines, thus making a bullish flag pattern (see image below)
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Prices have been taking support, around the band (17,330 – 17,520) which is the long term support range for the index, thus increasing the possibility of a reversal
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Post reversal, a breakout above the bullish flag helps prices resume the long term trend (uptrend in this case)
Interesting! Final thoughts? 🤔
- The consistent higher high higher low (HH HL) patterns indicate that the index has been in a steady uptrend
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On a daily time frame, making a bullish flag pattern increases the chances of reversals at the current price (support band)
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We started on a weekly time-frame with overall price action and trend analysis and took second confirmation on a daily time frame, safeguarding us against possible traps
Keep a track?
What else caught our eye? 👀
Crypto prospects look bleak
- In a new bill the GoI is looking to ban all ‘private cryptocurrencies’ but will allow exemptions to promote the technology
- The bill will also propose a framework for the creation of RBI’s own digital currency
- Such a ban will be difficult to enforce – and the GoI is yet to give clarity on the way ahead
India’s video market is getting bigger than ever
- India’s total video market (includes traditional TV and digital) is currently at $11.6 billion
- It is estimated to grow at 9.5% CAGR in the next 5 years to hit $18 bn in revenue
- Growth in subscriptions will largely come from online video while ad revenues will be bought in by both mediums
TVS Motors looking to enter EVs
- TVS Motors is looking to invest Rs. 1200 crore in EVs over the next four years
- It will mainly be for design, development and manufacturing of new products, as well as capacity expansion
- A MoU for the same has already been signed
The CANSLIM strategy
The CANSLIM method is a stock-screening technique that was developed by William O’Neil, who was the founder of an American stock research company called the Investor’s Business Daily
The acronyms of CAN SLIM are C – current quarterly earnings, A – annual earnings, N – new product, service, or management, S – supply and demand, L – leaders or laggards, I – institutional ownership, and M – market direction.
