Reliance Jio Q2 earnings: Key things to watch out for

Reliance Jio Infocomm Ltd, India’s newest and only profitable telecom operator, is expected to witness a further decline in its average revenue per user given that a chunk of its subscriber additions in the September quarter could be low-paying users.

Jio’s parent Reliance Industries will announce its financial results for July-September quarter later today.

The company’s subscriber base as of June end was 331.3 million. It had reported a profit of ₹8.91 billion in the June quarter, up 45.6% year-on-year and an operating revenue of ₹116.79 billion rupees, up 44% on year.

Macquarie Research expects Reliance Industries’ telecom arm to report 351 million subscribers, while ARPU is expected to drop to ₹120 in the September quarter from ₹122 in the June quarter.

To be sure, while Jio has witnessed a continuous drop in its average monthly billings over the past six quarters, it still outperforms its rivals on this metric.

From ₹154 in the December 2017 quarter, Jio’s ARPU fell 15.6% to ₹130 in the same quarter in 2018 and to ₹126.2 in the March 2019 quarter.

“Incrementally we expect the growth to come more from the mid-to-low end subscribers and in process diluting the overall ARPU,” Bank of America Merrill Lynch said in a report dated 16 October.

ARPU is the total revenue of the operator divided by the number of users or connections on its network.

Comparatively, Airtel’s ARPU rose to ₹129 in the June quarter from ₹123 in the preceding three months. It has not yet announced its September quarter earnings. Vodafone Idea posted an ARPU of ₹108 in the June quarter.

At a time when its rivals are weaning away bottom-of-the-pyramid subscribers by launching minimum recharge plans and improving their ARPU, Jio continues to widen its subscriber base by adding low-paying users on its network.

“In the next 12-18 months, we expect Jio to bundle content, add more value and would raise tariffs by offering more value to the consumer,” Bank of America Merrill Lynch said.

Industry analysts will look out for management commentary on the company’s ability to maintain revenue momentum, capex outlook and update on the rollout of its fibre-to-the-home (FTTH) offering Jio GigaFiber.

Jio GigaFiber is touted as the largest greenfield fixed-line broadband rollout globally, with simultaneous introduction in 1,600 cities across India.

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