Look for this number in Reliance Jio’s earnings — it will tell you if the tariff will rise
Business Insider India
Reliance Jiohas witnessed a slowdown in subscriber addition and decline in average revenue per user (ARPU).
- Analysts believe the telco may have to resort to hiking tariffs to sustain earnings growth.
- Jio also has a much smaller active subscriber base compared to Airtel.
Analysts say, the only solution to these problems is to increase the tariff. The upcoming earnings on Friday will decisively show how soon this impending tariff hike is likely to take place. Data from the Telecom Regulatory Authority of India (
Ambani thought that the
Most people in India still use Jio as a second phone for its cheap data plans. Jio has the lowest active subscriber percentage of all the three private telcos – at 79%, while Airtel enjoys a much higher rate at 97%. And that has meant that Jio’s revenue per user continues to decline.
Low ARPU and inactive users subscribers together could limit Jio’s revenue growth to just 30.5%, according to an estimate by ICICI Securities. The telco recorded revenue growth of 39.9% in the previous year.
The cost for Jio is also rising and, eventually, the users may have to pay for it
According to the ICICI Securities report, Jio’s reliance on the InvIT structure - wherein Jio has to pay rent for use of tower infrastructure owned by companies like Brookfield Infrastructure Partners LP. This has resulted in higher costs for the telco. Jio had sold its tower arm in October 2020 to Brookfield and a group of investors.
Apart from this, Jio has spent a significant amount on spectrum – the latest auction saw Jio spend ₹57,000 crore in new acquisitions. This, the ICICI report states, could result in a fall in earnings if revenue growth continues to elude the telco.
AdvertisementDespite being a pure 4G player, Jio is underperforming when it comes to ARPU. There are two reasons for this – inactive subscribers and a higher mix of the lower ARPU JioPhone users.
“We believe Reliance Jio should be comfortable taking tariff hike if the current market structure is maintained, wherein it provides more value for money to subscribers compared to peers. This structure would ensure Jio grows its subscribers faster,” stated an ICICI securities report dated April 8, 2021.
Jio faces a two-faced problem – slowdown in subscribers and ARPU
One of the problems that Jio has been facing over the last few quarters is the active subscriber market share. Active subscribers are those who are actively using the telecom service – in essence, they are paying customers.
While Jio’s numbers improved in the second half of 2020, it lost out to Airtel as of January 2021 – Airtel had 34.3% market share while Jio came in second with 33.2%.
This has spilled over to the subscriber additions as well.
After registering a stellar growth in the first six months of 2020, Jio has faced stiff competition from Airtel in the second half. In fact, in the second half of the year, Airtel added nearly 15 million more subscribers than Jio.
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