Reliance Jio’s subscriber additions may gain pace, but the money it makes from each one of them could remain flat
Reliance Jio’s subscriber additions have sprung back after several months of muted growth in 2020.
- Between February and April this year, the telco added more than twice the number of subscribers than its rival Airtel.
- However, the real story will be how much money it is making from each subscriber.
AdvertisementIndia’s largest telecom player Reliance Jio may have sorted out the subscriber additions problem, but it has one more issue to battle and it could pose a significant dilemma for the company that has played the game of value-for-money over premium quality services.
The Mukesh Ambani-led Jio has been under pressure since the second half of 2020-21, lagging behind its rival Airtel in terms of new subscriber additions. It solved this problem to an extent as it added over 17 million subscribers between February and April this year. This is more than double of the total subscribers added by its rival Airtel.
However, the amount of money that it makes from each subscriber – average revenue per user (ARPU) – remains under pressure.
Analysts have previously said that Jio needs tariff hikes to solve these problems, but so far, the telco has refrained from doing so. Instead, it has launched new plans that offer unlimited daily data in order to attract the premium, high-value customers, hoping that this will augment its ARPU.
Subscriber additions to remain steady
Analysts at Bank of America Global Research believe that Jio will add 15 million subscribers in the June 2021 quarter – emulating its performance in the previous quarter.
Jio’s parent company,
While this is a positive sign after the number plummeted to a low of 5 million in the December 2020 quarter, analysts estimate that a larger proportion of these subscribers could be
JioPhone is the telco’s affordable feature phone.
AdvertisementAnd that’s a problem. JioPhone plans are relatively cheaper when compared to the regular plans. This could have a notable impact on the money that Jio makes from each user.
Jio’s ARPU is already under pressure – it registered its first decline in 15 months in the March 2021 quarter.
This, coupled with a marginal increase in revenue growth and higher network costs could lead to a flat quarter for the telco.
“As a result, we model 3.5% quarter-on-quarter revenue growth at Jio. We expect network operating expenditure to rise in the first quarter due to seasonal spend leading to a flattish Ebitda margin of 47.8%,” stated a BofA Global Research report dated July 7.
EBITDA stands for earnings before interest, tax, depreciation and amortisation.
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