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Reliance Jio Q4 Results Preview: ARPU seen stagnant amid churn in user base
Growth in India’s telecom industry has likely moderated for the first time in nearly three years amid a churn in subscriber base and the absence of across-the-board tariff hikes.
The situation isn’t much different at the market leader.
Revenue at Reliance Jio Infocomm Ltd. grew 0-4% sequentially in the fourth quarter of the fiscal ended March 31, 2023, as indicated by analysts. The growth came on the back of increased data usage as users upgraded to mobile broadband services on smartphones, even as tariff hikes in entry-level plans by rivals induced a churn in the subscriber base.
That’s likely to reflect in how much the Reliance Group firm earns from each subscriber, as well as operational performance.
Reliance Jio’s ARPU is expected to remain stagnant at Rs 178–179—an all-time high hit in the December quarter, according to Kotak Institutional Securities Ltd., Motilal Oswal Financial Services Ltd., and Nomura.
“Over the last few quarters, we saw sharp market share gains by Airtel and Jio from Vi, which may moderate given that Vi users are now seeing decent network experiences,” Motilal Oswal said in a research report. “We expect a 1-2% ARPU increase across the telcos, driving 2-3% sequential revenue growth for Airtel and Jio.”
But analysts were divided on Reliance Jio’s operational performance in the March quarter. While Jefferies expects the telecom company’s earnings before interest, tax, depreciation, and amortisation to decline sequentially, Nomura and Kotak Institutional Securities see the metric trending higher.
“We expect flattish growth in Jio’s Ebitda, led by steady 5 million subscriber additions. This will be offset by a 1.1% sequential decline in average revenue per user,” Jefferies said in a note. Nomura pegs the figure at 3% higher, and Kotak at 2%.
Analysts anticipate an increase in 4G and postpaid subscribers for all three companies, which could support the rise in blended ARPU. Reliance Jio, in particular, stands to gain as it is now offering unlimited 5G data on prepaid plans of Rs 239 and above in more locations.
At 5–6 million, Reliance Jio is likely to have added the highest number of subscribers in January–March quarter.
Spending on the rollout of 5G services likely remained elevated in the March quarter, as Jio has expanded coverage to 406 cities and 265 cities. The company—which has a capex plan of Rs 2 lakh crore, including spectrum—aims to achieve pan-India 5G coverage by December 2023 by using its standalone architecture.
To be sure, the wider telecom industry needs to earn Rs 256-285 from each user in the next 3-5 years to justify the spending on 5G services. With the current levels at Rs 138–197, that seems like an uphill task unless tariff hikes come into play.
Jio, whose user base is still largely prepaid, has introduced fresh postpaid plans and new 5G offers to lure high-paying subscribers—their impact will be keenly watched when the firm declares its quarterly results today. Bloomberg
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