1. Quick turnaround: How Reliance Jio turned profitable

Quick turnaround: How Reliance Jio turned profitable

Continues to beat peers on data volumes and usage per customer

By: | Mumbai/new Delhi | Published: January 20, 2018 6:06 AM
Reliance Jio, Bharti Airtel, Mukesh Ambani, news on reliance jio, latest news on reliance jio, telecom operators, Idea, global digital powerhouse, india, Reliance chairman, news on relaince, Ebitda, Bharti Arpu The company, which had posted a net loss of Rs 271 crore during the previous quarter, posted a net profit of Rs 504 crore during the December quarter. (Reuters)

Just like it did in the September quarter, Reliance Jio on Friday once again surprised by turning out an impressive set of numbers during the October-December period. The company, which had posted a net loss of Rs 271 crore during the previous quarter, posted a net profit of Rs 504 crore during the December quarter. This is higher than the country’s largest telecom operator Bharti Airtel, which posted a net profit of Rs 306 crore during the quarter. Jio, which started commercial operations from September 2016, started releasing its earnings from the July-September quarter. It had started charging its subscribers from April 1, 2017. Though Jio has been posting impressive numbers, analysts have raised some questions over its accounting practices. For instance, Jio does not fully capitalise its assets and spectrum is amortised on a usage basis rather than the straight line method by other telecom operators. Under Jio’s method, depreciation and amortisation depends on the pattern of consumption of expected future economic benefit, which is akin to the unit of production depreciation method. This means Jio has determined the total data capacity of its network over the life of the spectrum allocation and the consumption of GBs per quarter will determine the quantum of depreciation and amortisation charge. The D&A cost under this would be lower, especially in the initial years, compared with the straight line method.

Analysts also feel that Jio’s average revenue per user (Arpu) at Rs 154 to be on the higher side as bulk of its customers are on the Rs 309/399 tariff package. During October-December, Jio’s revenues increased 12% quarter on quarter at Rs 6,879 crore. Ebitda (earnings before interest, taxes, depreciation and amortisation) stood at Rs 2,628 crore, an 82.1% increase from the preceding quarter. The earnings before interest and tax (Ebit) stood at Rs 1,436 crore, a 453.1% sequential rise. Margin expanded to 38.2% against 23.5% in the preceding quarter. With a revenue of Rs 6,879 crore, Jio is a tad behind Idea Cellular, which reported a revenue of Rs 7,465.4 crore during the July-September quarter. Idea is yet to report its December quarter earnings. On operating metrics, Jio continues to be far ahead of peers like Bharti Airtel. Its Arpu during the quarter was Rs 154, which though was lower than Rs 156.4 reported by it in the preceding quarter, but was higher than Bharti’s Arpu of Rs 123.

Similarly, Jio’s data traffic at 431,00,00 million Mbs was much higher than Bharti’s 110,58,39 million Mbs. Jio’s data volume compared to the preceding quarter increased by 14%. Data usage per customer though was a tad lower at 9600 MB compared with 9620 MB in the preceding quarter. Still, it was the highest in the industry as Bharti’s usage per customer stood at 5349 MB. On total voice traffic though, Jio with 311,130 million minutes is lower than Bharti’s 494,546 million minutes. However, on its own, Jio registered an increase of 30% compared to the preceding quarter. However, usage per customer of Jio’s was higher at 694 minutes, compared with Bharti’s 575 minutes. Here Jio registered a growth of 11% sequentially. Jio’s monthly churn, though the lowest in the industry, increased to 1.4% per month during the quarter compared with 1% in the preceding quarter. Bharti had registered a decline in churn during the December quarter.

Jio said that it added 21.5 million (net) subscribers during the quarter, taking the total subscriber number to 160.1 million at the end of December 2017. Jio, which has been a gainer of the 57% cut in mobile termination rate to 6 paise per minute from the earlier 14 paise, said that its interconnect usage charge expense during the quarter was lower at Rs 1,081 crore compared to Rs 2,140 crore in Q2. “I would like to thank all our customers for partnering with us in this revolution which has made India a global digital powerhouse. I congratulate all our employees and partners for the strong performance. Jio’s strong financial result reflects the fundamental strength of the business, significant efficiencies and right strategic initiatives. Jio has demonstrated that it can sustain its strong financial performance,” Reliance chairman and managing director Mukesh Ambani said in a statement.

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  1. Narendra M. Apte
    Jan 20, 2018 at 8:45 am
    1. When we compare telecom companies’ financial performance, let us not be carried away by their profitability. We have an example of Bharti Airtel which made huge profits in early years as it faced no serious compe ion. After Reliance Jio made an entry in telecom sector, Jio broke oligopoly of three top companies (Bharti Airtel, Vodafone Idea). These 3 companies are now compelled to face a bitter reality: fall in average realisation per user 2. My view is that these three companies made no efforts to introduce new technology or to widen customer base. They were content with making money from hapless customers who had no choice. This scenario changed after arrival or Reliance Jio on the horizon. 3. Is it not true that focus of the telecom companies has shifted from voice call business to data business? Hence, I suppose it is necessary to examine dispassionately future of the telecom industry in India keeping in view introduction of new technology and cost reduction possibilities.
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