An­a­lysts Sur­prised

The Economic Times - - Econ­omy: Macro, Mi­cro & More -

Jio’s ARPU stood at ₹ 156.4 com­pared with ₹ 154 that mar­ket leader Bharti Air­tel recorded in the April-June pe­riod, a fact which sur­prised some an­a­lysts. Air­tel will re­port its Septem­ber quar­ter re­sults on Oc­to­ber 31.

Low prices have helped Jio net 138.6 mil­lion users, con­sol­i­dat­ing its po­si­tion as the fourth­largest telco. Of these, 15.3 mil­lion were net ad­di­tions in the just-ended quar­ter with only 1% of users mov­ing to an­other net­work, a mi­gra­tion that’s ex­pected to slow, Jio said. Ac­tive users num­bered 107 mil­lion.

To­tal wire­less data traf­fic in the quar­ter was 3.78 bil­lion GB, far higher than its more es­tab­lished ri­vals such as Bharti Air­tel, while av­er­age voice traf­fic was 2.67 bil­lion min­utes per day. The com­pany said it recorded the “high­est per capita data con­sump­tion at 9.62 GB/ user/month” and “the high­est per capita voice con­sump­tion at 626 min­utes per month” along with 1.78 bil­lion hours of high-speed video con­sump­tion a month.

“The rapid up­take of Jio ser­vices re­flects the la­tent need of the so­ci­ety,” RIL chair­man Am­bani said in a re­lease. “The strong fi­nan­cial re­sults of Jio demon­strates the ro­bust busi­ness model of Jio and the sig­nif­i­cant ef­fi­cien­cies that the com­pany has built through its in­vest­ment in the lat­est 4G tech­nol­ogy and right busi­ness strat­egy.”

EBITDA MAR­GIN OF 23.5%

The com­pany’s earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA) was ₹ 1,443 crore in June-Septem­ber pe­riod, with an EBITDA mar­gin of 23.5%, while EBIT was at ₹ 260 crore with the EBIT mar­gin at 4.2%.

“Pos­i­tive EBIT in the first quar­ter of com­mer­cial opera- tions, given tremen­dous up­take by sub­scribers and cost ad­van­tages gen­er­ated through use of ef­fi­cient 4G tech­nol­ogy,” the com­pany said. Srikanth said many had been “scep­ti­cal” about how Jio would fare but the “net­work helps you de­liver these kind of num­bers”.

Jio’s Septem­ber quar­ter net­work op­er­at­ing costs were ₹ 1371.89 crore, li­cence and spec­trum charges were ₹ 399 crore, staff ben­e­fit costs were ₹ 303.10 crore and in­ter­est costs ₹ 673.38 crore.

Debt stood at ₹ 49,000 crore, on an eq­uity base of ₹ 90,000 crore, and the com­pany needs to make ₹ 22,000 crore of pay­ments to the gov­ern­ment for spec­trum over a pe­riod of time. RIL has so far in­vested ₹ 1.45 lakh crore in Jio, of which ₹ 62,000 crore is work in progress. The com­pany recorded capex of ₹ 7,000 crore in the Septem­ber quar­ter and that will re­main in the same range in the next few quar­ters as well, said An­shu­man Thakur, head of strat­egy and plan­ning at Jio.

De­pre­ci­a­tion and amor­ti­sa­tion ex­penses were at ₹ 1,183.88 crore and sell­ing and dis­tri­bu­tion costs at ₹ 260.84 crore.

“These num­bers would pos­i­tively sur­prise any ex­pert. From a chal­lenger per­spec­tive to have these num­bers on de­but is a record of sorts. This will put fur­ther pres­sure on in­cum­bents,” said San­jay Kapoor, a former chief ex­ec­u­tive of Bharti Air­tel’s In­dia op­er­a­tions. “This ARPU also means that Jio does not have low-end cus­tomers. They have smart­phone cus­tomers and not the fea­ture phone cus­tomers yet,” he added.

How­ever, not all an­a­lysts were as con­vinced about the num­bers.

San­jiv Bhasin, ex­ec­u­tive V-P, mar­kets and cor­po­rate af­fairs, at bro­ker­age IIFL, ex­pressed sur­prise.

“The re­sults are a bit too flat­ter­ing. Air­tel in its prime had an ARPU of (`) 170 and Jio in first re­sults has over ( ₹) 156 ARPU and just ₹ 260-odd crore loss. The num­bers are baf­fling,” he said.

Thakur said most of Jio’s users have sub­scribed to its ₹ 399 plan and very few have taken up the ₹ 149 plan.

Mritunjay Ka­pur, part­ner, KPMG In­dia, said with data “pick­ing up mo­men­tum, we can ex­pect higher growth in rev­enue in com­ing quar­ters”.

Af­ter a rapid start when Jio hit a record 100 mil­lion users in 170 days, the pace of sub­scriber ad­di­tions has slowed as it be­gan charg­ing for data — al­beit at sharply lower rates than oth­ers — from April and due to the lim­ited num­ber of 4G smart­phones in the mar­ket. The com­pany is now tar­get­ing 500 mil­lion fea­ture phone users through Reliance Re­tail’s JioPhone, which is a 4G fea­ture­phone bun­dled with a Jio SIM. The phone has been pre-booked by 6 mil­lion users who will re­ceive de­liv­ery by end of Oc­to­ber. The com­pany will then restart pre-book­ings for the next lot of JioPhones that are be­ing made lo­cally, said Sunil Dutt, head of sales and dis­tri­bu­tion for de­vices at Reliance Re­tail. Thakur added that a new tar­iff plan was around the cor­ner to push sub­scriber ad­di­tions.

Jio is tar­get­ting 50% of rev­enue mar­ket share in the next few years and of­fered the mass-mar­ket phone ef­fec­tively ‘free’ with a down pay­ment of ₹ 1,500 that’s re­fund­able af­ter three years.

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