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RJio’s subscriber loss pain to end soon, but Airtel seen on better footing

For the third quarter in a row, telecom services provider Reliance Jio saw a decline in its net subscribers. In Q4FY22, its net subscribers fell 10.8 million sequentially, to 410.2 million. In a post earnings call, the company’s management attributed this loss to SIM consolidation after it raised tariff in its prepaid segment. SIM consolidation refers a decline in the number of mobile SIM cards in the market, which usually happens after telecom companies raise prices.

Now, the good part is that according to the management, the impact of SIM consolidation is largely behind the company.

And analysts share this optimism. The calculations of analysts at Kotak Institutional Equities suggest an implied net gain of subscribers in the month of March of 2.2 million versus a loss of 9.3 million in January and 3.7 million in February 2022.

Note that close competitor Bharti Airtel Ltd has seen healthy growth in net subscriber additions in the months of January and February, showed offical data. The Telecom Regulatory Authority of India is yet to publish subscribers trend data for the month of March.

“With subscriber clean-up nearing its end, subscriber additions should improve from FY23,” analysts at Jefferies India Pvt Ltd said in a report on 8 May. The report further added that a pick up in Jio’ subscriber additions from 1Q should bode well for the tariff environment in the future. In Q4, Jio’s average revenue per user (ARPU) at Rs167.6 per subscriber per month, improved 21.3% year-on-year. This was aided by tariff hikes announced in December 2021 and clean-up of inactive subscribers.

According to some analysts, the upsides to ARPUs from subscriber clean-up may not be significant from hereon. That said, analysts at ICICI Securities Ltd still expect around 3-4% benefit of tariff hike to ARPUs in Q1FY23.

But the expected improvements in Reliance Jio’s subscriber additions and ARPUs provides only limited comfort to its investors, considering that Airtel would remain on a relatively stronger footing on both these parameters, at least in the near-term.

“Jio’s 11% QoQ ARPU growth in 4Q offers comfort on our expectation of 10.5% QoQ ARPU growth for Bharti in 4Q. We see limited risk for Bharti’s subscriber addition estimate of 1.5 million as it has already added 2.3 million subscribers during Jan-Feb 2022,” added the Jefferies report.

Going ahead, a key catalyst for telecom sector would be the upcoming 5G spectrum auction. Live Mint

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