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Reliance Jio announces new postpaid plan with international calling rate at Rs0.5 per minute

Jio keeps up attack on incumbents with new Rs199 unlimited postpaid plan as well as international roaming plans

Reliance Jio announced a new unlimited postpaid plan at Rs199 per month along with national roaming, international calling and international roaming plans among others. The plan comes with auto payment and access to the Jio app universe. The new plan comes with ISD calling activated and with international calling rates starting at Rs0.50/minute and roaming charges at Rs2/ min and Rs2/ MB for countries like US and Canada. These charges are much lower than competitors, whose international calling rates range from 50p/ min to Rs 6/min and international roaming charges range between Rs2/min and Rs10/min.

This plan is likely to deal a heavy blow to incumbent telcos who are yet to recover from the reduction of IUC charges in Q3FY18. Due to reduction in IUC charge as well as higher competition, ARPU for Bharti Airtel and Idea Cellular declined by 5.9% qoq and 7.9% qoq respectively. Going forward we are likely to see further reduction in international calling rates, further impacting ARPUs for incumbents.

Bharti Airtel is likely to see revenue CAGR of 4.5% due to (1) subscriber growth offsetting reduction in ARPU and (2) ARPU reduction slows as Reliance Jio raises prices in FY19E. EBITDA margin are expected to rise to 42.7% in FY20E, owing to improved profitability of Airtel Africa. We expect Bharti Airtel to report PAT CAGR of 82% over FY18-20E. The stock is currently trading at 21.6x FY20E EPS.

Idea Cellular is facing intense competition, hence we expect revenue CAGR of 15.5% over FY18-20E leading to an EBITDA margin of 19% in FY20E. Revenue growth would be supported by a significant growth in data revenues over FY18-20E. EBITDA margin are expected to decline by 239bps to 19% in FY20E. The stock is currently trading at 11.3x FY20E EBITDA.

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