Q2 Results: Reliance Jio’s Operating Profit Meets Estimates Even As ARPU Falls

Reliance Jio Infocomm Ltd.’s operating profit met analyst estimates in the quarter ended September even as its average revenue per user declined.

Its operating profit rose 10 percent to Rs 5,139 crore, the country’s largest operator by subscribers said in an exchange filing. That’s in line with the BloombergQuint consensus estimate of Rs 4,994 crore. Net profit rose 11 percent sequentially to Rs 990 crore.

Revenue rose 5.7 percent quarter-on-quarter to Rs 12,354 crore. That compares with the estimated Rs 12,437 crore. The company’s margin expanded 160 basis points on a quarterly basis to 41.60 percent.

But the average revenue per user of the Mukesh Ambani-led group telecom arm fell for the eighth straight quarter to Rs 120. ARPU was expected to decline as the operator has been aggressively adding JioPhone users who usually subscribe to low-cost plans.

Earlier this month, Reliance Jio announced it will charge customers 6 paise a minute for voice calls made to rival phone networks but will compensate them by giving free data of equal value. This will be the first time that Jio users will pay for voice calls.

Agreed Gurmeet Chadha, co-founder and chief executive officer, Complete Circle Consultants, saying Jio was adding customers at the lower band of packages. “Jio should be looked at in terms of comprehensive view—broadband, e-commerce and content play,” he said. “You need to see at the overall trend instead of just APRU metric.”

The charges are expected to drive up revenue by 5 percent, translating into a 10 percent increase in operating profit, Edelweiss said in a research report prior to the earnings. “We expect Jio to take further tariff hikes for higher payouts towards InvIT—to fund incremental capex for its fibre-to-the-home business and bring down net debt,” the report said.

Last month, the telecom operator forayed into broadband business by offering six plans to users in the range of Rs 699 to Rs 8,499, with bundled in router, 4K set-top box, a television set and content and streaming services.

Shares of parent Reliance Industries rose 1.4 percent ahead of the earnings compared with a 0.65 percent gain in Nifty 50.

Other Highlights:

• Lower access charges and employee costs aided operating profit.
• Subscriber base at 355.2 million as of Sept. 30; added 2.4 crore subscribers in the second quarter.
• Data traffic grew 56 percent year-on-year; voice growth at 52 percent over last year.
• On track to achieve 50 percent Ebitda margin.
• Gross customer addition at 31.6 million.
• Monthly churn rate reduced sequentially to 0.74 percent.
• Inter-user connect charges for last quarter was Rs 652 crore.
• Launched Jio GigaFiber across 1,600 Indian cities.