Reliance Jio Expected to Continue Gaining Market Share as Rivals Lose Customers
Bharti Airtel and Vodafone Idea continue to lose customers, whereas Reliance Jio’s ARPU continues to decline as it adds more low-paying subscribers.
One of the parameters that are being most looked at in the telecom industry these days is the Average Revenue Per User (ARPU). The ARPU has become a measure of how the company is performing in the industry, and all the telecom operators seem to be fighting over it by vying for the most share in the market. However, on paper Reliance Jio is the only profitable telecom operators, but the ARPU of the company seems to be declining quarter after quarter. As per an ET report, the Mukesh Ambani led telecom operator has witnessed the decline in ARPU for seven consecutive quarters, and the trend continues. This is mainly because the telecom operator has been adding low paying customers to its subscriber base, as it aspires for a massive goal of 500 million subscribers. A big chunk of these low paying customers are the Jio 4G feature phone, JioPhone, users,
Reliance Jio ARPU Continues to Decline
According to Axis Capital, the ARPU of Reliance Jio is expected to fall further down to Rs 118, which is 3% lower than the current levels mainly driven by the JioPhone sales in the September quarter. On average, the JioPhone users bring an ARPU of Rs 99 per month for Reliance Jio combined with cashback and digital recharges. To recall, in FY18 September, Reliance Jio used to boast of an ARPU of Rs 156 whereas, now the ARPU figures for Reliance Jio have shrunk down to Rs 122 over the quarters, consecutively falling. But, although the telecom operator seems to be witnessing declining ARPU, the profitability of the company remains the same.
The brokerages expect Reliance Jio to post profits for the July-September quarter for the consecutively eighth time, whereas, the rival telecom operators, Vodafone Idea and Bharti Airtel are expected to keep posting losses for some more months. This month, Reliance Jio will post its financials for the quarter, whereas, other telecom operators will post their financials next month.
Reliance Jio Operating Costs to Remain Stable for Now
According to the estimates charted out by Axis Capital, the operating income of Reliance Jio has increased 5.2% quarter to Rs 4,930.3 crore, but the EBITDA margin stays somewhat stagnant at 40.2%. The first has also remarked that it does not expect the operating costs to go up as the telecom operator launched the fiber-based home broadband service only last month and the costs would only go up if the company were to ramp up the operations on that front.
Bharti Airtel and Vodafone Idea Expected to Report Revenue Dips
Also, the profits of the company are expected to go up 54% in the year and nearly 18% on quarter to Rs 1,051 crore. The quarterly revenue is expected to grow by 33% on the year and 5% on quarter to Rs 12,267.2 as the telecom operator continues to add subscribers. UBS, another Swiss brokerage firm expects that Bharti Airtel and Vodafone Idea will report sequential dips in mobile revenue. It also says that Bharti Airtel is expected to outperform Vodafone Idea as the latter has been losing subscribers on its network. The firm has also estimated that Bharti Airtel will also thin out its losses in the September quarter and most likely they will be in the range of Rs 1,200 crore and Rs 1,705 crore.
Bharti Airtel and Vodafone Idea to Continue Losing Customers
To recall, in the June quarter, Bharti Airtel had reported a loss of Rs 2,866 crore in the June quarter. This was because of the one-time costs related to 3G equipment and a sudden increase in finance costs. As per ICICI Securities Airtel’s September quarter, consolidated revenue will grow nearly 1% sequentially and 2.5% on year to Rs 21,005.8 crore. This is because the firm expects the other businesses of the company like DTH and enterprise to see growth. On the other hand, Vodafone Idea’s revenue has been estimated to fall 3.5% on quarter and 9.6% on year to Rs 10,900 crore mainly because of customer losses and lower addition of customers on the mobile broadband network.
Axis has also estimated that Reliance Jio’s user base will swell to 355 million customers in the quarter ending in September. Whereas, Vodafone Idea and Bharti Airtel have been estimated to lose 13 million and 9 million customers respectively. Bank of America Merrill Lynch expects Reliance Jio to continue gaining market share.