Reliance Jio ARPU Growth Underwhelming: ICICI Securities

ICICI Securities said that considering that there was one additional day in the quarter, the ARPU growth of the telco is underwhelming. Further, the company’s FTTH and enterprise revenues have remained steady.

Highlights

  • ICICI Securities said that considering that there was one additional day in the quarter, the ARPU growth of the telco is underwhelming.
  • ICICI Securities has said that Jio’s subscriber base should increase further in FY23 due to the benefit of JioPhone Next.
  • The September quarter and half-yearly performance results of Reliance Jio were recently announced by the Reliance Industries Limited (RIL).

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Reliance Jio

The September quarter and half-yearly performance results of Reliance Jio were recently announced by Reliance Industries Limited (RIL). The telco reported an average revenue per user (ARPU) growth of 3.7% to Rs 143.6 in Q2 FY22. ICICI Securities has termed the growth as underwhelming. The analyst noted that Jio has cleaned up some of its inactive subscriber base, which has led to the growth of ARPU. It is worth noting that Jio’s subscriber base declined by 11.1 million users in the September 2021 quarter. This is the first time the company has lost subscribers in a quarter since its launch.

Jio ARPU Growth Underwhelming Despite Numerous Factors in Favour

ICICI Securities said that considering that there was one additional day in the quarter, the ARPU growth of the telco is underwhelming. Further, the company’s FTTH and enterprise revenues have remained steady. The analyst has cut its earnings before interest, tax, depreciation, and amortisation (EBITDA) estimate by 5.6% for Jio in FY22. However, for FY23, ICICI Securities believe that Jio’s EBITDA will be higher because of the launch of JioPhone Next in the country.

Jio’s EBITDA has dipped by 35% YoY to Rs 3 billion. This could be due to the increased investments that the company has made in its networks, and the lower ARPU hasn’t helped much either. The telco’s net debt has risen to Rs 697 billion against Rs 290 billion in FY21. The net debt has risen because of the deferred spectrum liability that has been recognised in H1 FY22 for the spectrum bought in March 2021 auctions.

ICICI Securities has said that Jio’s subscriber base should increase further in FY23 due to the benefit of JioPhone Next. Further, the ARPU assumption of the analyst for the year FY22 has been cut, but the future ARPU has been maintained because of the possible tariff hike. Reliance Jio is expected to launch the JioPhone Next in the festive season of Diwali 2021, which is not far away now.

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