Q4 Results: Reliance Jio’s Profit Remains Flat As ARPU Falls
Reliance Jio’s aggressive customer addition strategy continued to hurt its ARPU.
Reliance Jio Infocomm Ltd.’s quarterly profit remained flat after its average revenue per user fell more than expected as the telecom operator continues to offer the cheapest tariffs to widen customer base.
Net profit rose 1.1 percent over the previous quarter to Rs 840 crore in the January-March period, according to its exchange filing today. That was much lower than the analyst estimates compiled by BloombergQuint, which had pegged the profit at Rs 973 crore.
- Revenue rose 7 percent quarter-on-quarter to Rs 11,106 crore.
- Operating profit increased 6.8 percent sequentially to Rs 4,326 crore.
- Margin narrowed 19 basis points to 38.95 percent.
- Average revenue per user fell to Rs 126 per month.
Mukesh Ambani’s telecom upstart has acquired over 30 crore customers by offering cheap data and is fast closing in on India’s second-largest operator Bharti Airtel Ltd. Since the launch of Reliance Jio in 2016, the telecom industry has been engaged in a brutal pricing war that has bled profits and triggered consolidation in the industry. But with Reliance Jio now having captured a significant market share, things are expected to move up from here.
Crisil Ratings said the average revenue per user—key indicator of telecom profitability—is at a decadal low, but has finally bottomed out. “The Indian telecom industry will reverse a two-year declining trend with a 7 percent revenue growth in fiscal 2020,” it said in a recent report.
Even Edelweiss said as Reliance Jio reaches closer to its 40-crore customer base target, the management will have to pause and take stock of the company’s objectives. “After achieving one of its key goals—400 million subscribers in H2FY20—Reliance Jio will hike prices to improve return ratios,” it said in an earnings preview.
“Data-addicted smartphone customers will be key target for consistent ARPU recovery,” Edelweiss said. “This segment holds the maximum ARPU improvement potential as customers are addicted to high data use and have requisite paying capacity.”