News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

This article was first published 6 years ago
Rediff.com  » Business » How newbie Jio managed to trump Airtel

How newbie Jio managed to trump Airtel

By Romita Majumdar
January 20, 2018 09:21 IST
Get Rediff News in your Inbox:

While Airtel’s India wireless operational performance was one of its worst in recent times, Jio surprised the Street by reporting a higher expected operating and net profit.

The challenger has outdone India’s largest telecom services provider, if the December-quarter numbers are anything to go by.

Incumbent Bharti Airtel turned in a consolidated net profit of Rs 3.05 billion across its telecom businesses in India and Africa, while Reliance Jio, which started its services in September 2016, made a profit of Rs 5.04 billion.  

 

While Airtel’s India wireless operational performance was one of its worst in recent times, Jio surprised the Street by reporting a higher expected operating and net profit.

Jio was aided by strong subscriber addition and average revenue per user (ARPU), which held steady at Rs 154, compared to the September quarter. Airtel’s ARPU, on the other hand, fell 15 per cent. 

Further, while the sharp 57 per cent cut in interconnect usage charges (IUC) and customer downtrading to lower value packs significantly dented Airtel’s operating profit and margins, Jio gained from the IUC cut.           

Thus, while Airtel’s margins were down nearly 180 basis points to 32.6 per cent, Jio’s margins were up nearly 15 percentage points to 38.2 per cent. 

Even on the subscriber additions front, while Jio's subscriber base increased 22 per cent to 160 million, the same for Airtel was 290 million, up about 3 per cent. The strong operating performance helped Jio post a net profit of Rs 5.04 billion, against analysts' expectations, which were pegged at a tenth of this.

Airtel does not report net profit for the India wireless business. Its Ebit figure was Rs 1.66 billion, down 93 per cent over the year-ago quarter. 

Reliance Industries CFO Alok Agarwal said the telecom service had become profitable three years before industry estimates.

Given the sharp drop in IUC, Jio posted an operating profit of Rs 26.28 billion up 82 per cent over the September quarter. This came despite network operating expenses going up 26 per cent and licence/spectrum charges rising 55 per cent. Jio saw gross subscriber addition of 27.8 million and net subscriber addition of 21.5 million during the quarter. 

"The earlier-than-expected break-even at net profit level for Reliance Jio is a positive surprise for the Street. We maintain our Buy rating on RIL," said Abhijeet Bora, research analyst, Sharekhan.

Photograph: Shailesh Andrade/Reuters.

Get Rediff News in your Inbox:
Romita Majumdar in Mumbai
Source: source
Related News: Airtel, Jio, IUC, ARPU, India
 

Moneywiz Live!