Why RIL’S in­vestors didn’t cheer the sub­scriber share gains in Re­liance Jio

Mint Asia ST - - Otherviews - R. SREE RAM

CLOS­ING THE GAP Re­liance Jio con­tin­ues to add sub­scribers at a brisk pace, nar­row­ing the mar­ket share gap with in­cum­bents.

The Jio jug­ger­naut con­tin­ues to roll on, with the new en­trant re­port­ing the high­est ad­di­tion in ac­tive sub­scriber base for the fourth con­sec­u­tive month. Re­liance Jio In­fo­comm Ltd added 8.5 mil­lion ac­tive sub­scribers in Oc­to­ber, much bet­ter than Bharti Air­tel Ltd’s tally of 3.4 mil­lion, shows data com­piled by Moti­lal Oswal Se­cu­ri­ties Ltd. Voda­fone Idea Ltd’s ac­tive sub­scriber base eroded by 2.9 mil­lion. Its shares un­sur­pris­ingly fell 2%.

In­ter­est­ingly, Jio’s par­ent, Re­liance In­dus­tries Ltd’s (RIL’S) shares also fell 1.5% de­spite the gains in sub­scriber share. It may be gain- ing ground, but its fo­cus on sub­scriber ad­di­tions and cost-ef­fec­tive fea­ture phones are lim­it­ing earn­ings ex­pec­ta­tions. “We note that the chase for fea­ture phone sub­scriber mar­ket share has led to the roll out of low-av­er­age rev­enue per user plans,” Moti­lal Oswal said in a note, re­fer­ring to the Jiophone of­fer­ing. In any case, in­vestors are al­ready pric­ing in a far higher mar­ket share for Jio in RIL’S cur­rent val­u­a­tions. The monthly sub­scriber ad­di­tion num­bers can do lit­tle to in­crease bullish­ness on the stock.

Be­sides, the sub­dued trend in sub­scriber ad­di­tions at in­cum­bent tel­cos does not nec- es­sar­ily mean com­men­su­rate rev­enue mar­ket share gains. Af­ter all, Air­tel and Voda­fone Idea have been look­ing to weed out low-value sub­scribers. They in­tro­duced min­i­mum recharge plans, re­quir­ing sub­scribers to manda­to­rily recharge to stay ac­tive on the net­work.

In fact, this may lead to fur­ther sub­scriber share losses, as the full im­pact of the tar­iff hike is yet to be seen.

Ac­cord­ing to Moti­lal Oswal, around onethird of (35%) of Air­tel and Voda­fone Idea sub­scribers are low-pay­ing cus­tomers (sub-`15). As the tar­iff hikes kick in, the broking firm sees sig­nif­i­cant churn in this part of the user base.

“A drop in the num­ber of sub­scribers, per se, isn’t some­thing that will worry in­cum­bents,” says an an­a­lyst at a do­mes­tic in­sti­tu­tional bro­ker­age firm. Of course, it’s an­other mat­ter if Jio starts wean­ing away high-value sub­scribers as well. Rev­enue mar­ket share num­bers till the Septem­ber quar­ter show that the new en­trant has been more suc­cess­ful in mar­kets out­side the met­ros, in­di­cat­ing that in­cum­bents have done rea­son­ably well in hold­ing on to high-value sub­scribers.

Much also de­pends on how dual-sim users re­act to the tar­iff hikes. If a large sec­tion of cus­tomers prefers to re­tain Jio as their pri­mary tele­com con­nec­tion, then it can make a no­table dent to in­cum­bents’ rev­enue base, say an­a­lysts.

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