One bright spot in Reliance Industries Ltd’s (RIL) March quarter results was an increase in Jio’s net subscriber additions. In the third quarter, they jumped to 15.2 million. It’s worth noting that this is the best result in the previous four quarters. Of course, net subscriber additions are also much smaller than the average of about 25 million before the tariff hikes in December 2019.
Nonetheless, the net additions were significantly higher than the 5.2 million, 7.3 million, and 10.8 million net additions reported in the December, September, and June quarters, respectively. Though JioPhones were relaunched with a bang, analysts at Jefferies India Pvt. Ltd. said, “This also reflects that farmer protests are not having as much of an effect as they did in December and January.”
Jio was also able to contain the churnin the March quarter, it had seen in the previous two quarters. According to Ambit Capital Pvt. Ltd analysts, churn decreased to around 15 million in the third quarter, which is possibly due to new JioPhone plans. Even so, this has an effect on the efficiency of the subscriber base. Users of JioPhone produce significantly lower average revenue per consumer (Arpu).
To be sure, Jio’s Arpu for the March quarter was supposed to be capped due to the adjustment in the interconnect use charges regime. Despite this, Jio’s Arpu dropped at a faster-than-expected pace of 8.5 percent in the previous quarter. Given Jio’s increase in subscriber additions in the March quarter, it will be important to see how Bharti Airtel Ltd and Vodafone Idea Ltd fare when their March quarter results are announced.
Recall that in the previous two years, Jio’s net additions trailed those of Airtel, and the latter is expected to continue doing well. Given how well Jio and Airtel are doing in terms of subscriber additions, Vodafone Idea’s market share losses could accelerate. Mentioned by the analysts Jio gaining large amounts of spectrum and resuming strong subscriber additions, Vodafone Idea’s problems are likely to grow over time.
“Bharti Airtel, we believe, will also respond by launching smartphones in collaboration with handset OEMs and financial partners,” mentioned by Credit Suisse analysts. “In addition, Jio is planning to release a low-cost smartphone in the coming months, which is expected to help with subscriber growth.”
They added ,“We believe that Airtel’s financial position allows it to launch low-cost smartphones (in tie-ups)”. Vodafone Idea, on the other hand, is more fragile in the event of a disruptive smartphone launch due to its weakened balance sheet, continuing market share loss, and higher share of feature phone subscribers”.Overall, following Jio’s fourth-quarter earnings, many analysts have raised their hopes for future price increases. Of course, sales forecasts for telecom firms will have to be reduced to that degree.
The fact that there are no big debt-related payments due in the near future, is Vodafone Idea’s saving grace. Analysts at IIFL Securities Ltd mentioned on May 3 in a note, “We delay tariff hike expectations to the end of 2021 due to Vodafone Idea’s reduced urgency for price increases, which is due to a moratorium on past spectrum instalments in effect for FY22 and no major debt repayments or AGR (adjusted gross revenue) payments in 1HFY22.”
