Reliance Jio's revenue per user set to fall below Airtel's

Kolkata:Reliance Jio Infocomm’s average revenue per user, a key performance metric, is likely to fall below Bharti Airtel’s for the first time since the Mukesh Ambani-led telco started reporting quarterly earnings, analysts said.
Jio’s average monthly ARPU in the April-June period may drop to Rs 124, declining for the seventh straight quarter and less than Airtel’s estimated Rs 127, as the country’s youngest telco attracts low revenue-generating customers in the hinterland through its cheap VoLTE feature phone.

Axis Capital estimates “Jio’s ARPU will decline 2% sequentially to Rs 124 due to a mix change,” driven by additions of users generating monthly ARPU of Rs 99.

Rajiv Sharma, co-head of research at SBICap Securities, said Jio’s monthly ARPU could “remain subdued as it continues to only add marginal customers, although things could change if it ramps up visibility on the postpaid and enterprise business domains, or rings in a quick tariff hike.”

From a peak of Rs 156 in the July-September quarter of FY18, Jio’s ARPU has shrunk steadily to Rs 126 over the past six quarters.

Airtel, which has taken recourse to minimum recharge plans over the past two quarters to weed out low-revenue generating customers, is slated to report a monthly ARPU of Rs 127 in April-June, according to brokerage Kotak Institutional Equities.

Axis Bank expects Jio’s operating income to drop 16% sequentially to Rs 3,631.2 crore in the June quarter and its Ebitda margin to contract to 30.3% from 39% in the previous three-month period as “operating cost is expected to increase” after the creation of infrastructure investment trusts (InvITs).

In the March quarter of FY19, Jio transferred its tower and fibre network assets to two special purpose vehicles owned by the two InvITs. In April, parent Reliance Industries said the two trusts had acquired 51% stakes each in Jio’s fibre and tower units – Jio Digital Fibre and Reliance Jio Infratel. The trusts are sponsored by Reliance Industrial Investments & Holdings, a unit of Reliance Industries.

Brokerages expect Jio to report its seventh successive quarterly profit in the April-June period, propelled by sustained, strong subscriber growth.

Axis estimates Jio’s net profit will jump 88% on-year and 37% on-quarter to Rs 1,148 crore, while Morgan Stanley sees it growing 23.5% on-year but slipping 10% on-quarter to about Rs 756 crore.

Brokerage HSBC estimates Jio’s quarterly revenue to grow 48% on-year and 8% sequentially to Rs 11,965.2 crore.

Jio is expected to notch up strong net subscriber additions, although it will be well below the almost 27 million users who came on board in the March quarter. Axis and HSBC estimate Jio’s net customer adds at 25 million and 23 million, respectively.