Jio’s Q3 revenue seen rising but digital is yet to catch up
Reliance Jio Infocomm Ltd’s revenue is expected to rise in the December quarter driven by improvements in key metrics such as average revenue per user (Arpu) and the addition of high-paying customers to JioFibre, the company’s fixed-line broadband services.
However, the revenue of its parent Jio Platforms Ltd is yet to be on a par with the telecom segment as businesses of various digital services are still developing. Additionally, capital raised from global investors in 2020 is set to be utilised in the next few quarters, analysts said.
Jio Platforms Ltd, which houses the telecom business and a slew of other digital services such as healthcare, payments, gaming, cloud, over-the-top (OTT) content and music, raised ₹1.52 lakh crore in 2020 from 13 global investors, including Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, KKR, ADIA, Mubadala, TPG, L Catterton, Public Investment Fund of Saudi Arabia, Intel Capital, and Qualcomm.
Revenue from digital services will depend on how fast the products of Jio Platforms are developed with the investments made last year. “The gap between Jio Infocomm and Jio Platforms revenues would show how digital revenues are trending,” BofA Securities said in a report.
The revenue of Jio Platforms is likely to grow 4.3% sequentially to ₹19,300 crore in the December quarter. The telecom arm is expected to clock a 3.7% growth sequentially to ₹18,130 crore and a 29.8% rise in revenue from a year ago, according to brokerage firm Axis Capital.
Analysts expect that the Arpu of the telecom business in the third quarter will rise on the back of annual recharges by residual subscribers at higher tariffs for the first time since the hike in December 2019.
Axis Capital said Jio’s revenue will grow in October-December as India’s largest telecom operator by market share is expected to add 6 million subscribers and its Arpu should improve by 2% to ₹148 from ₹145 a quarter ago. The addition of higher-paying customers to JioFibre, which introduced cheaper plans last year to cash in on the surge in Covid-led internet demand, may also support Arpu growth.
However, Axis Capital said, “Net subscriber addition will be muted, based on the October 2020 data released by Trai (Telecom Regulatory Authority of India)”. The churn rate, which heightened because of restrictions to contain the spread of coronavirus starting March, is expected to remain elevated.