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Jio’s Revenue Per User May Decline Even As Voda Idea, Bharti Airtel Gain A Bit

Reliance Jio’s average revenue per user (ARPU), a key performance metric, is likely to continue falling for the seventh successive quarter as the Mukesh Ambani-led telco is still largely adding low-value customers, analysts said.

Axis Capital estimates Jio’s ARPU to decline 3% sequentially to Rs 118 in the September quarter, driven by additions of JioPhone users generating modest monthly ARPU of Rs 99 and cash backs on digital recharges.

In contrast, incumbent telcos, Bharti AirtelNSE 0.60 % and Vodafone Idea, which implemented minimum recharge plans last year, are estimated to report modest ARPU gains on quarter to Rs 130 and Rs 109, respectively, helped by the exit of non transacting customers.

From a peak of Rs 156 in the September quarter of FY18, Jio’s ARPU has shrunk steadily to Rs 122 over the past seven quarters.

Brokerages, however, expect Jio to report its eighth successive quarterly profit in the July-September period, propelled by sustained, strong customer growth. Airtel and Vodafone Idea, by contrast, are likely to continue posting losses.

Jio is expected to report its September quarter results later this month while the other two telcos are likely to report their results next month.

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Axis Capital estimates Jio’s operating income increasing 5.2% on quarter to Rs 4,930.3 crore but sees ebitda margin staying flattish on quarter at 40.2%, though it does not expect any negative impact on operating margin as the firm’s wired home broadband services “were launched in the last month of the September quarter, and related operating costs would come only with the ramp-up” of the service.

The brokerage expects Jio’s net profit to jump 54% on year and nearly 18% on quarter to Rs 1,051 crore, and its quarterly revenue to grow nearly 33% on year and 5% on quarter to Rs 12,267.2 crore as strong subscriber adds are likely to continue.

By contrast, UBS expects Airtel and Vodafone Idea to report sequential dips in India mobile revenue in a seasonally weak quarter, although it sees “the consolidation of Tata Teleservices’ (mobility business) and a rising proportion of customers on bundled plans to reduce seasonality impact” on the Sunil Mittal-led telco.

The Swiss brokerage expects “Airtel to outperform Voda Idea” as the latter continues to lose market share even though customer losses are estimated a tad lower, amid progress in its dualnetwork integration exercise.

Brokerages estimate Airtel to significantly narrow net loss in the September quarter, likely in the range of Rs 1,200 crore and Rs 1,705 crore.

Airtel had reported a consolidated net loss of Rs 2,866 crore in the June quarter, its first in 14 years, dragged by a one-time expense relating to 3G gear and a sharp jump in finance costs, even though India mobile services continued to show signs of a recovery.

ICICI Securities estimates Airtel’s September quarter consolidated revenue to grow nearly 1% sequentially and 2.5% on year to Rs 21,005.8 crore, as it expects the nonmobile segments such as DTH (read: digital TV) and enterprise to show improvements in the fiscal second quarter. It also estimates the telco’s Africa revenue and operating income to grow 0.8% and 0.7% sequentially to $802 million and $350 million, respectively.

By contrast, the brokerage estimates Vodafone Idea’s revenue to shrink 3.5% on quarter and 9.6% on year to ?10,900 crore amid continuing customer losses and lower mobile broadband subscriber additions.

Bank of America-Merrill Lynch backed the view, saying it expects the telco born a year ago out of the merger of erstwhile Vodafone India and Idea CellularNSE 1.98 % to “report the weakest numbers” among the big three telcos, estimating its losses to widen by 8% sequentially to 5,500 crore in the September quarter.

Jio is slated to maintain its strong quarterly net customer adds, with Axis estimating its 4G user base to swell nearly 24 million to over 355 million in the July-September period. By contrast, Vodafone Idea and Airtel are estimated to report 13 million and 9 million customer losses, respectively, courtesy more low-ARPU customer exits due to the minimum recharge plans.

Bank of America-Merrill Lynch expects Jio to “continue to gain market share as its tariffs remain competitive and coverage relatively better than peers”.―Gadgets Now

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