Reliance Jio Infocomm Ltd. reported an operating profit in the first quarter of commercial operations even as it continues to drive a tariff war and consolidation in India’s telecom sector.
In its maiden quarterly filing, the Mukesh Ambani-led wireless carrier reported earnings before interest, tax, depreciation and amortisation of Rs 1,443 crore for the three months ended September, it said in a statement. Operating margin stood at 23.5 percent.
The country’s newest telecom operator’s average revenue per user was Rs 156.4. That compares with Rs 154 blended ARPU reported by Bharti Airtel Ltd., India’s largest mobile services provider, in the quarter ended June. Bharti Airtel is yet to announce its results for the second quarter.
Jio’s performance only shows “if you have the right product at the right price you will get the returns that you want,” according to former Reliance Jio chief Sandeep Das. “It’s a vindication of their core strategy to ensure that they serve the data requirements of a large number of people in the bottom of the pyramid,” Das told BloombergQuint.
The newest telecom operator said that data consumption on its network averaged at around 9 GB per month per user. This is expected to rise to double digits as data usage grows and as Jio adds more content to its 4G services, Das added.
Sandeep Das, Former CEO and MD, Reliance Jio I don’t think we’ve seen anything more than the tip of the iceberg.
Reliance Jio began charging users from April after disrupting the industry with six months of free services. It still offers cheaper plans, forcing rivals to cut tariffs. As competition rose, Vodafone India and Idea Cellular Ltd. agreed to merge. Bharti Airtel too will take over Tata Group’s mobile services business, after acquiring Telenor’s India operations.
The Mukesh Ambani-led company has been gaining users, largely at the expense of smaller rivals. It added 1.53 crore new subscribers in the three months to September, taking its user base to 13.86 crore.
Jio’s results are “incredible” news for the telecom industry, according to Rajan Mathews, chairman of the industry lobby Cellular Operators Association of India. If more data usage can push the ARPU to Rs 200 a month, “then it’s good for the health of the industry as other operators too can start pushing up” their tariffs, Mathews told BloombergQuint.
He added that Reliance Jio has set a benchmark, which incumbent operators will have to match, and in turn will benefit customers.
Rajan Mathews, Chairman, COAIJio has set the pace, rest of the competitions is trying to quickly catch up.
Jio’s “cut-throat pricing” and free services have ended up developing the data market, said Mahesh Uppal, telecom analyst and director of ComFirst India. He said that only a year ago, the average data consumption was less than one gigabyte, which has now gone up to 9 GB in Jio’s case.
Reliance Jio reported a loss of Rs 271 crore on a standalone revenue at Rs 6,147 crore for the three months ended September.
(Corrects and earlier version to state that it’s the company’s first quarter of commercial operations in the headline and the first paragraph)
. Read more on Markets by BloombergQuint.