Traffic travels past a billboard for Reliance Jio Infocomm Ltd. in the Bandra area of Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  

Reliance Jio’s Average Revenue Per User Falls Again

Reliance Jio Infocomm Ltd. reported a near flat profit growth in the March-ended quarter as the average revenue it earns from every user continued to fall amid price cuts in India's hypercompetitive telecom industry.

Jio reported a standalone net profit of Rs 510 crore in the quarter ended March compared with Rs 504 crore in the previous three months, according to a media statement. That’s slightly lower than the Rs 584 crore consensus estimate of analysts compiled by BloombergQuint. Operating revenue increased 3.6 percent sequentially to Rs 7,128 crore.

  • Operating profit rose 2.5 percent to Rs 2,694 crore.
  • Operating margin narrowed 110 basis points to 37.8 percent.

Mukesh Ambani's upstart has been adding customers at a rapid pace since its entry in September 2016 when it triggered a tariff war and consolidation in the telecom sector. It has over 15 percent of India's telecom market share. That's come at the cost of the average revenue per user, one of the key metrics for telecom profitability.

Reliance Jio's ARPU fell further to Rs 137 during the quarter. It has declined from the industry-high of Rs 156 two quarters ago. India’s largest telecom operator Bharti Airtel saw its ARPU slip to Rs 116 during the period.

That's largely due to the two price cuts Jio announced in January earlier this year. It also allowed existing Jio Prime users to extend their membership for one more year without paying for it.

Reliance Jio’s Average Revenue Per User Falls Again

The popularity of its 4G-enabled feature phone also helped Jio add a “disproportionate” amount of users, according to a Morgan Stanley note. “We expect the momentum to continue over the next few months on the back of the sale of JioPhones.”

The JioPhone, which comes at a refundable deposit of Rs 1,500, has been India's best-selling feature phone this year. It has been driving mobile phone sales in the country even as smartphone shipments remained flat, according to research firm Counterpoint.

Jio's plans though are much bigger than just telecom, according to Probal Sen, research analyst at IDFC Securities. It wants to use its cheap data offerings to push digital content, he said. Internet consumption in India has nearly tripled since Jio’s launch.

During the quarter, Jio's parent Reliance Industries acquired almost 5 percent stake in Eros International Plc., that has a movie library of over 3,000 films in multiple Indian languages, to jointly produce and consolidate content in India. It also bought stake in New York-based music streaming service Saavn that owns rights to over 30 million songs, and merged Jio's own music app with it.

The launch of every new service, whether broadband or getting deeper into content, will continue to have the focus of investors, Sen added.

Also read: Ambani’s Mobile Startup Packs 6-Month Sales Into a Quarter

Other Highlights

  • Jio added 95 lakh customers in March.
  • Average data consumption per user per month was at 9.7 GB, while average voice consumption per month was at 716 minutes.
  • Jio reported a churn rate of 0.25 percent per month. It claims it is the lowest in the industry

Also read: Reliance Industries Profit Misses Estimate In March Quarter