Reliance Jio may generate Rs 21,300 cr revenue, but will remain a drag on Reliance Industries: Moody’s

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New Delhi | Published: April 6, 2017 4:51:20 AM

Reliance Jio Infocomm (Jio) could generate revenues of `21,300 crore for the current fiscal ending March 2018, Moody’s Investor Service projected on Wednesday, but said that the RIL subsidiary will remain a drag on its parents cash flows for the next 2-3 years.

The global ratings agency expects a major chunk of Jio’s 72 million subscribers to opt for the `303 plan as it offers benefits and complimentary services for the next three months — till June. (Reuters)

Reliance Jio Infocomm (Jio) could generate revenues of `21,300 crore for the current fiscal ending March 2018, Moody’s Investor Service projected on Wednesday, but said that the RIL subsidiary will remain a drag on its parents cash flows for the next 2-3 years.

The global ratings agency expects a major chunk of Jio’s 72 million subscribers to opt for the `303 plan as it offers benefits and complimentary services for the next three months — till June.

“Assuming all 72 million subscribers pay `303 per 28 days for July 2017 to March 2018, Jio will be able to generate revenue of about `213 billion (`21,300 crore) for the fiscal year ending March 2018,” Moody’s has projected.

In comparison, Bharti Airtel’s Indian mobile services generated revenue of `43,600 crore for the nine months ended 31 December 2016.

On March 31 Jio announced that 72 million subscribers have opted for the Prime offer. It also extended the membership drive till April 15, besides sweetening the deal by offering that those who purchase the `303 plan in the next 15 days will be able enjoy 1 GB data per day and free local and STD calls till June.

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Moody’s said that it expects a “significant” portion of the 72 million subscribers to opt for the `303 plan, given that is the minimum plan that gives complimentary services for three months.

“However, as the price plan does not require the subscriber to commit beyond the 28 days, they are free to switch at any time after that. Therefore the Jio-Prime membership will need to continue to be competitive and service quality will need to be maintained at high levels in order to retain customers,” it added.

On the cash flow problems that Jio can create for its parent Reliance Industries (RIL), Moody’s said, “Even if Jio were to generate about `20,000 crore in revenue, it will not be sufficient to generate free cash flows as the company’s spending on capex, which we expect to be at least `15,000 crore per year, will be significantly higher than its EBITDA.

Despite the success in achieving a large paying subscriber base, we continue to expect that Jio will remain a drag on RIL’s cash flows for at least the next two to three years.”

It, however added that enrolling 72 million paying subscribers for its telecom services is credit positive.

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