Reliance Jio To Add New Users In Coming Months; ARPU Might Decline

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Reliance Jio is likely to add more users in the coming days. However, a reduction in average revenue per user is likely to continue as JioPhone users attract low revenue-generating users. Also, Jio's Ebitda margins are likely to see some pressure due to license fees.

 
Reliance Jio To Add New Users In Coming Months; ARPU Might Decline

Notably, Reliance Jio added 14 million users in the Q1 of this financial year due to its cheap JioPhone plans. The company has managed to increase its average revenue per user marginally to Rs. 138.4 from Rs. 138.2 in Q4 FY21. Jio's ARPU is below estimates, said brokerage Jefferies said in a note.

JioFiber Revenue In April-June Quarter

Analysts believe that the increasing share of JioFiber every quarter shows that the ARPU of the mobile business is decreasing, Jefferies added. The firm added that the bulk of its users are coming from its feature phone segment.

On the other hand, analysts believe Jio will continue to add new users as the telecom operator bought spectrum, JioPhone new users, and the upcoming smartphone will help the telco to increase its user base.

The firm said that Reliance Jio's growth is positive for the entire telecom sector, especially for all private telecom operators. Besides, the firm estimated that Reliance Jio will manage to grow 530 million by the end of 2024.

It also expects that Reliance Jio might deliver a 20 percent Compounded Annual Growth Rate in FY21-24. For the unaware, the company has managed to increase its data usage because of JioFiber's new users.

JioFiber Data Usage In April-June Quarter

The JioFiber users are consuming 300GB of data per month. In fact, the company has managed to increase its user base by three million in the April-June quarter. It is important to note that Jio reported a 29 percent increase in its profit during the same period.

 

"Jio's incremental Ebitda margin was low at 51 percent due to a sharp rise in license fee (+9 percent on quarter) and network operating costs (+4 percent on quarter)," said Jefferies.

However, it seems that the telco might see a sharp increase in operating costs as 5G trials have been started and soon it will launch its services.

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