Analysts Expect Jio to Record Higher User Additions in Upcoming Quarters
Dolat Capital, a financial firm engaged in the trading markets on Saturday said in a note that Jio recorded “healthy” performance in a “Covid impacted quarter.” The firm highlighted that Jio added 14.4 million users in its first-quarter while its average revenue per user (ARPU), a key financial metric, remained “stable” at Rs 138.4. “Jio’s smartphone offer in Mar’21 shall have boosted additions,” Dolat Capital said in its note on Saturday. “Launch of [the] Jio smartphone in Sep’21 and additional spectrum should help it accelerate its subscriber addition.” Dolat Capital said that the largest wireless operator in India is “well-poised to benefit from improving industry scenario of increase in ARPU” and the Vodafone Idea “shutdown.” The firm said that the second scenario has a higher probability in the “absence of relief” from the Supreme Court in the adjusted gross revenue (AGR) case. “We see Jio as a structural growth story for the next 4-5 years. This growth in our view will be a 2-phase process. In the first phase it would be a combination of subscriber growth and ARPU uptick,” Dolat Capital said. The firm also expects Jio to “capitalize on alternate revenue streams” like Fiber-to-the-Home (FTTH), enterprise, healthcare and education “in partnership with other players that ride on the telcos infrastructure or by competing [with] them.” Mumbai based, KRChoksey Investment Managers said that the growth recorded by Jio was “muted due to the second wave of lockdown related freebies that were doled out” in its first quarter. “We expect subscribers’ base and ARPU to grow at [a] strong pace over [the] short-medium term given [the] lifting of lockdowns,” KRChoksey said in a report on Tuesday. “We anticipate strong customer additions from Q2FY22, as customer-focused initiatives with strong growth in data and voice consumption, to enhance ARPUS over the short-medium term.”
Reliance Jio Needs Tariff Hikes to Maintain Momentum Say Analysts
Meanwhile, ICICI Securities, a subsidiary of ICICI Bank on Sunday highlighted that the ARPU recorded by Jio was “flattish” on a quarter-on-quarter (QoQ) basis at Rs 138. The firm said that the recorded ARPU was “despite an additional day and growing FTTH subs who bring in much higher ARPU.” “ARPU has been flattish QoQ despite growth in FTTH and enterprise revenues, which means the underlying mobile ARPU declined,” ICICI Securities said in a report on Sunday. “We see limited scope for revenue growth for RJio in the absence of a tariff hike and rise in operating costs from InVIT payments and new spectrum.” In a separate report, ICICI Securities said that the operator “needs tariff hikes to maintain earnings growth momentum” and that the recorded ARPU can be “attributed to higher Jiophone addition, which has much lower ARPU.” Similarly, Motilal Oswal Financial Services on Sunday said that the operator “held its ground after the push from the Jio Phone launch” in the previous quarter. Reliance Jio in late February announced a new scheme for its JioPhone that provided users “unlimited services” for two years for Rs 1999. The operator in early March also unveiled five new data plans for the JioPhone priced at Rs 22, Rs 52, Rs 72, Rs 102 and Rs 152. It has to be noted that Reliance Jio in late June unveiled JioPhone Next, its upcoming smartphone “jointly developed” by Jio Platforms and Google. Motilal Oswal highlighted that the operator “aims to target” the 300 million “feature phone addressable subscriber base” with its JioPhone Next. “Given the lower ability of feature phone customers to pay, it will be interesting to see how RJio prices the device as well as its monthly plans to attract consumers,” Motilal Oswal said in its report on Sunday. “However, the recent product showcased in the AGM underscores a higher success probability of the product.” Crucially, the Indian diversified financial services firm said that the upcoming smartphone from Jio will enable the operator to record over 71 lakh user additions in its current financial year. “While this (JioPhone Next) could restrict ARPU improvements, given the focus on subscriber-led growth, we think the differentiated product in the Smartphone category could yet offer avenues for a tariff hike, but certainly not in the near term,” Motilal Oswal said.
