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Reliance Jio loses steam, Q4 numbers below estimates

FE Bureau

After posting an impressive set of numbers for the last five quarters, Reliance Jio on Thursday disappointed on almost all fronts by missing analysts estimates in its January-March earnings.

During the period, the company s net profit at Rs 840 crore, was up by a mere 1.1% sequentially, far below a 25% growth estimated by brokerages.

Jio, which had been witnessing a decline in its average realisation per user due to tariff cuts, was able to check the downward slide with steady tariffs during the December quarter but lost steam during the March quarter by reporting an Arpu of `126 against `130 in the preceding quarter. Analysts had estimated an Arpu of `129. In fact, Jio s Arpu during the end of March quarter last year stood at `137, which means in a span of a year it has come down by around `11.

Speaking to news persons in a post-earnings conference, Anshuman Thakur, head of strategy and planning, Reliance Jio, said the Arpu numbers are stable and the sequential decline seen during the quarter is attributable to it being a shorter quarter compared to previous ones. During the quarter Arpu is a bit lesser because it had lesser number of days 90 days versus 92 days in the previous quarters — so a 2.2% dip in Arpu is along expected lines.

Also, the Jio phone users that come in with the Rs 501 Monsoon Hungama, come in on a Rs 99 plan, so to that extent the Arpu reduces, he said. However, Thakur called the Arpu trajectory stable and said the company will be maintaining that.

Though the incumbent operators are yet to announce their numbers for the quarter going by analysts estimates, Bharti Airtel and Vodafone Idea are expected to improve their Arpus during the March quarter by removing low paying subscribers. Bharti’s Arpu is expected to be close to Jio’s during the quarter.

Jio’s revenue during the quarter also missed estimates at Rs 11,106 crore, a growth of 7% on a sequential basis. Ebitda at Rs 4,329 crore, was up 6.8% from the preceding quarter, but again below estimates.

Margin also disappointed at 39%, down 5 bps sequentially.

On other operating metrics, Jio’s performance during the quarter showed considerable slowing down, which could mean it has hit a saturation point and going forward numbers would be in similar region.

Its data traffic at 9560 billion GB saw an increase of 10.6% on a sequential basis. Data usage per customer was flattish at 10.9 GB per customer, per month against 10.8 GB in the preceding quarter. This is the second consecutive quarter when Jio posted flattish trend on data consumption front.

Jio’s voice volume at 724.14 billion minutes registered an increase of 14.2% compared to the preceding quarter. Usage per customer at 823 minutes registered a growth of 3.65% sequentially.

Jio’s monthly churn still remains the lowest in the industry at 0.75% per month.

Though Jio continued its strong subscriber growth trend with net addition of 26.6 million subscribers during the quarter, it total user base at 306 million at the end of the quarter fell short of analysts expectations of 312 million. Otherwise, gross addition in the industry now doesn’t mean much because incumbents Bharti Airtel and Vodafone Idea are now removing low paying consumers and as a result are losing subscribers in high double digit numbers but their Arpu is improving.

The company has already completed transfer of its fibre and tower undertakings to separate companies, following on the lines of other incumbent telecom operators.

Consequent to the transaction, there is a liabilities reduction of Rs 1.07 lakh crore from Jio, which now has a debt of Rs 67,000 crore. In addition, about Rs 78,000 crore of preference shares have been issued to Reliance Industries.

The transaction has led to deleveraging of Jio’s balance sheet and future capex on passive infrastructure assets would be undertaken by the two entities, a company statement said.

The company said it has entered into long-term usage agreements as anchor tenant for these assets.

“We at Jio are truly overwhelmed and proud to now serve over 300 million subscribers. Growth in data and voice traffic at this scale has been unparalleled, Reliance chairman and managing director Mukesh Ambani said in a statement.