Reliance Jio, India's largest telecom operator, released the Q2 Fy23 report a couple of days back. While the analysts expected the telco's average revenue per user (ARPU) figure to cross Rs 180 levels, that didn't happen. The lower the ARPU, the lower will be the overall revenues. With Jio, there's definitely an advantage of scale. But the revenues won't improve much if the scale of customers goes slightly higher and the ARPU sees a very marginal growth. Jio's ARPU was Rs 175.7 in Q1 FY23. In the following quarter, it jumped to Rs 177.2. This is a very marginal growth. Because of this, even the overall profits posted by the company saw minimal growth. In Q1, Jio posted a net profit of Rs 4530 crore, while in the second quarter, it stood at Rs 4729 crore.
While this is still much better than what the other telcos are posting, from the perspective of an investor, it is slow growth. Keep in mind that Reliance Industries Limited (RIL) wants to ship Jio off as another listed entity in the Indian stock exchanges. Thus, the investors interested in buying a piece of that would be more interested in how the company's performance is improving and at what rate.
Jio is likely to continue posting profits and stronger revenues than the other operators. Just for comparison, Airtel's ARPU was Rs 190, yet, its net profit stood at Rs 2145 crore, while Jio's net profit stood at Rs 4729 crore. Jio's net profit is double of what Airtel is generating. But is it enough?
Jio Needs 4G Tariff Hikes
Reliance Jio needs to go for 4G tariff hikes soon as well in order to improve ARPU and boost overall revenues. The ARPU growth, as mentioned above, was very marginal and too stale for an investor to be excited about. While for Bharti Airtel, the ARPU jump sequentially was quite good. Airtel's ARPU jumped from Rs 183 to Rs 190. Thus, Airtel's revenues were Rs 1607 crore in Q1, while it increased to Rs 2145 crore in Q2. So, a higher ARPU will definitely mean a positive thing for the overall revenues.
This is why Jio needs the help of another tariff hike. If that comes, it will enable Jio to increase its ARPU past the Rs 200 level. Airtel is already very close to the Rs 200 ARPU figure. A higher ARPU would enable Jio to surpass Rs 5000 crore net profit levels if expenses don't rise unnaturally.
Regardless, Jio wouldn't be the first one to implement tariff hikes. It would have to be Airtel only, as Vodafone Idea can't risk moving first because it would lead to a higher subscriber churn, and that's something the telco can't afford at the moment.