Reliance Jio no longer insulated from price wars, results show
Mumbai:reliance Jio Infocomm (Rjio), the telecom unit of India’s most valuable company, is no longer insulated from competition and price wars that eventually led to shrinking profits and losses for incumbent telecom operators.
During the quarter ended on March 31, the performance of Rjio remained subdued, with the company posting a mere 1% growth in profit from the preceding three months.
Rjio saw its average revenue per user (Arpu) fall to ₹137 in the March quarter from ₹154 a quarter earlier.
The company’s earnings before interest, taxes, depreciation and amortization (Ebitda) margin, which is a measure of operating profitability, took a beating because of the various discounts offered and stood at 37.8% at the end of the March quarter. Rjio’s Ebitda margin was 38.2% during the December quarter.
“Arpu came down... due to price action earlier in the quarter (March quarter),” said Rjio’s head of strategy and planning, Anshuman Thakur, at a post-result press conference.
“We have had a tariff reduction of about ₹50 over three months, which we have more than made up with subscriber growth,” Thakur said.
The fourth quarter numbers demonstrate that Rjio is no longer insulated from competition, said an ICICI Securities note on Reliance Jio dated April 30.
Any increase in competition would hurt Rjio equally or probably more than the incumbents, said the report.
Rjio has benefited from a 46.7% increase in prime membership revenues to ₹750 crore in Q4FY18, according to the ICICI Securities research. It will, however, see revenues from prime memberships cease from the next quarter as the company has waived off the oneyear prime membership fees for many of its subscribers.
It is difficult to comment about the ARPU going ahead (FY19), Thakur said on April 27. “We will have to see how the other operators do and of course the customer traction,” Thakur added.
Rjio’s focus for the coming months will remain on adding more subscribers to its network and price hikes—that could lead to ARPU corrections—are thus unlikely, Morgan Stanley said in a research report on the Indian telecom sector dated April 29.