Reliance Jio's recent Q3 profit is 'a bit too good to believe' for the analysts at research firm Sanford C. Bernstein. Late last month, the Mukesh Ambani-led Reliance Jio reported its first-ever profit of Rs 504 crore within just 15 months after starting the commercial operations. The telco posted a revenue of Rs 6,879 during the same quarter of the ongoing fiscal.
Analysts at Sanford C. Bernstein were surprised by Jio's profit report as they examined carrier's costs. "Jio’s “unique approach” results in a slower pace of recognising depreciation and amortisation, which led to a 12 billion rupee ($187 million) charge in the December quarter, according to a Feb. 2 Bernstein report. Using a rate similar to local rivals would have quadrupled that number and turned Jio’s reported profit into a loss of 24.1 billion rupees, analysts led by Hong Kong-based Chris Lane estimated," as reported by Bloomberg.
Bernstein analysts clasped down Jio's profit down to three factors: "lower network costs possibly due to favourable tower-sharing deals, reduced interconnect fees and its method of accounting for depreciation which “stands out as an anomaly” when compared to global peers."
For this report, Jio stated that the accounting statements were based on the applicable Indian Accounting Standards. “The accounting treatment has been reviewed and approved by the audit committee of the company and also specifically reviewed by the auditors,” the company said in an emailed statement.
A January 21 dated Morgan Stanley report said that "the result was boosted by Jio’s policy, linking depreciation charges to “its own assessment” of usage and economic benefit, while other Indian carriers amortise telecom assets at a fixed rate over time."
Reliance Jio also stated that it has over 160 million subscribers as of December 31, 2017, right behind Idea Cellular which has close to 195 million subscribers. Jio is still aggressively targeting consumers with industry's best 4G tariff plans, and if it continues the same, Jio will soon become a leading telco in the country.
