Reliance JioInfocomm has told analysts that it sees no reason to raise tariffs now as it is generating strong revenue growth and robust customer additions at the prevailing levels, signaling that a revenue recovery for rivals Vodafone Idea (VIL) and Bharti Airtel remains distant.
Various analysts from brokerages such as Goldman Sachs, Morgan Stanley and Citi Research, present at Jio’s post-fiscal third-quarter earnings meet, quoted the mobile phone company’s executives as saying that customer acquisition remains the focus, despite it having crossed 280 million subscribers, giving it a nearly 24% subscriber market share and over 26% revenue market share.
“Jio has said it will not tinker with tariffs and risk disrupting the strong subscriber (growth) momentum as its focus in the near term remains on adding subscribers,” stated a note from a Goldman Sachs analyst, who participated in the meet on Thursday.
Such a scenario, the global brokerage stated would mean that “revenues would stay stagnant for incumbent telcos (read: Vodafone Idea and Bharti Airtel) until Jio reaches its earlier stated target of 400 million subscribers”.
On Friday, shares of Bharti Airtel fell 6.4% to Rs310.95 while Vodafone Idea lost 4.5% to around at Rs35.20, on the BSE.
Analysts anticipate Jio’s user number to reach 302 million by end-FY19, given its monthly customer addition pace of around 9-10 million. Comparatively, at November end, Airtel had nearly 342 million subscribers and Vodafone Idea, just over 421 million. Airtel’s user base been flat or shrinking a tad in the last few months, while VIL has been losing users sharply.
Brokerage Credit Suisse said that Jio’s move to hive off tower and fiber assets into separate units, which will have outside investors, will decrease overall debt levels. It also “effectively punctures hopes of tariff increases for other telcos”.
CLSA, another brokerage, said it expects Jio to close a deal within the first half of 2019, deleveraging a big chunk of its $25 billion debt and thereby allaying a key concern.
At press time, Mukesh Ambani-owned Jio did not reply to ET’s queries.
Industry experts have lately suggested that Jio in 2019 is unlikely to chase customers in the way it did over the past two years, given the strong revenue and subscriber growth. This could have permitted Bharti Airtel and Vodafone Idea some leeway for price increases – even if marginal – this year. And any such raise could have led to some revenue recovery for India’s older operators, suffering from over two years of a brutal price war. But Jio’s statement before analysts appears to have dashed these hopes.
Bharti Airtel and Vodafone Idea are both likely to again report heavy losses later this month or early next month, as per an ET Poll. In contrast, Jio reported on Thursday its fifth straight profitable quarter with a 65% on-year jump to Rs831 crore in its December quarter bottom line, while operating revenue climbed 51% on-year to Rs 10,383 crore.
Experts said Jio is likely to keep tariffs low for a longer span since it trails the older carriers on RMS in the country’s biggest telecom markets – the metros and Category A circles – and is likely to continue its pricing aggression till it levels off with rivals on this score.
Metro and Category A circles collectively account for a whopping 53% of the telecom industry’s adjusted gross revenue or ‘AGR’ – the revenue that telcos derive from access services – according to latest data collated by the telecom regulator.