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Jio losing active users in Nov a hint that 5G rollout is not impactful in short-term

In line with a slowdown in revenue growth so far this fiscal, Reliance Jio has witnessed the worst fall in its active subscriber base in nearly two years, according to the latest Telecom Regulatory Authority of India (TRAI) data for November. The telecom operator’s active subscriber base fell by nearly three million month-on-month to 388 million in November, due to SIM card consolidation, purging of inactive users by the operator, and upgrades from JioPhones to smartphones, analysts said.

While industry executives and analysts do not indicate the trend as something to be jittery about for the company’s strong market hold, the loss of active subscribers by Jio means that there won’t be any tariff hikes by the operators in the times to come.

“Jio’s loss of active subscribers has come in largely at the JioPhone subscriber base and lower end users. While people leaving a second SIM card because of inflationary pressure is the reason for a fall in active subscribers, the company also removes inactive subscribers from its base after 90 days,” a Mumbai-based analyst said.

Active subscribers or Visitor Location Register is a temporary database of the subscribers who have roamed into the particular area an operator serves. From August to October, the telecom operator’s active subscribers rose by 8.8 million. In January 2021, Jio’s active subscribers fell by 3.4 million. In comparison, Airtel’s active subscribers rose by 1.8 million from August to October. In November, Airtel’s active subscribers base rose by 0.96 million. On the other hand, Vodafone Idea has been seeing a dip in its active subscribers continuously for eight months. Its active subscriber base fell by 16.4 million. Airtel and Vodafone Idea’s active users at the end of November were at 359 million and 209.7 million, respectively.

“RJio’s active sub market share dipped 13bps m-o-m (in November) to 38.3%; Bharti’s stood at 35.5% (up 25bps) while VIL’s fell 11bps to 20.7%,” ICICI Securities said. Owing to a steep fall in active users of Jio and Vodafone Idea, the total active user base fell by 4.5 million to 1.012 billion — the worst fall in seven months.

With a loss in industry-widesubscriber base and fall in active subscribers, the trend suggests a higher competition between telcos, especially Jio and Airtel, to capture the current base, which could largely be at the expense of their financially constrained peer Vodafone Idea.

“Sector’s MNP (mobile number portability) requests continued to inch upwards in November and are near peak levels. High MNP requests amidst a stagnant active subscriber base for the sector points to rising competition and focus on market share gains. This in turn is likely to keep churn levels elevated and drive up S&M (sales and marketing) costs for telcos,” Jefferies said.

According to TRAI data, in November, 12.02 million subscribers submitted requests for MNP, higher than 11.8 million in October. “The cumulative requests for MNP have been consistently increasing, particularly in the last 3-4 months validated by higher churn numbers reported by telcos, suggesting SIM consolidation,” brokerage Motilal Oswal said.

With regard to competition in the market, Jio is currently focused on increasing its market share and therefore not serious about taking tariff hikes, whereas Airtel and Vodafone Idea have been pressing towards tariff hikes to increase their average revenue per user (Arpu).

“There has been a change in strategy by Jio over the last year toward targeting premium-end subscribers. This exercise began early in FY22, where Jio lost 30 million subscribers as it started to churn out lower-Arpu subscribers, and this yielded results, with increased Arpu over this period. We believe it will target the high-end Arpu subscribers of Bharti and Vodafone Idea now with its aggressive 5G rollout,” JP Morgan said.

Despite a slowdown in its growth in the current financial year, it seems that Jio’s focus remains on 5G and that is why the upcoming tariff hikes might get pushed beyond 2023, some analysts believe. In the absence of tariff hikes and weak subscribers growth, the business growth can come in from increased consumption level from the existing subscribers. Financial Express

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