Falling Tariffs Bruise Reliance Jio Despite Profits
Jio’s average revenue per user fell the most in the final quarter of the previous financial year.
Billionaire Mukesh Ambani would have realised that the bruising pricing war cuts both ways.
His Reliance Jio Infocomm Ltd was the worst hit as tariffs continue to fall in the world’s second-largest telecom market. Not only did Jio’s growth slow down, its average revenue per user fell the most in the final quarter of the previous financial year. It reported its second straight profit but a flat growth.
The domestic revenue of Bharti Airtel Ltd.] also fell but India’s largest telecom operator managed to beat estimates as it was cushioned by an improvement in its Africa business. Sunil Mittal-led carrier reported its first loss in 15 years in India operations, while its Africa united reported a record profit.
Kumar Mangalam Birla-led Idea Cellular Ltd. reported the sixth straight loss in the quarter ended March. That narrowed from the previous three months on better-than-expected operational profit and higher other income.
Average revenue per user declined close to 11 percent for Reliance Jio – the highest among the three operators. Bharti Airtel and Idea Cellular reported a 6 and 8 percent decline, respectively, as they lowered tariffs at the start of the quarter. Their ARPUs have been falling for at least seven quarters now.
Bharti Airtel was the only operator to report lower earnings before interest, tax, depreciation, and amortisation compared with the previous quarter because of rising costs and falling revenue. Idea Cellular’s Ebitda jumped more than 18 percent – highest in the last 19 quarters – on cost cuts.
Total data consumption increased for all the three operators. Reliance Jio led with a usage of 5,060 million gigabytes, but its growth was the slowest.
Idea Cellular, with the lowest overall consumption, reported a 43 percent growth over the year-ago quarter.
Reliance Jio continued to add the most number of subscribers to its network. It now has 18.6 crore users compared with Bharti Airtel’s 30.4 crore and Idea Cellular’s 19.5 crore.
Churn ratio per month, or the percentage of customers who chose to discontinue services, declined for all three. It was the lowest for Jio and the highest for Idea Cellular.
Reliance Jio continues to spend the most to expand its network. Its capital expenditure for the quarter ended March at Rs 13,000 crore was more than twice the combined capex of its two rivals.
Idea Cellular was the only operator to reduce net debt as it raised funds during the quarter. Bharti Airtel and Reliance Jio’s debt rose by at least Rs 3,500 crore.
Bharti Airtel, which has the highest debt of close to Rs 95,000 crore on its book, also has the lowest leverage ratio at 3.5 times its Ebidta.
(This story was first published on BloombergQuint.)
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