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    Jio may keep tariff hikes on hold as rising churn hits net user additions: Analysts

    Synopsis

    Jio added a net 5.2 million users in the quarter compared with 7.3 million in the September quarter and 10 million in the June quarter of FY21. Its monthly churn rate for wireless subscribers rose from a modest 0.46% in the June quarter to 1.69% in the September quarter and 1.63% in October-December.

    Untitled-3Agencies
    Jio is still streets ahead of its rivals on the subscriber front, with almost 411 million users at December end, compared with 293.74 million for Airtel and 271 million for Vi at September end.
    KOLKATA: Kolkata: Reliance Jio’s lowest net user additions in the October-December period – even though tariffs were 7-20% lower than Bharti Airtel’s rates – may deter the Mukesh Ambani-led telecom market leader from increasing rates any time soon, analysts said.

    “The rise in monthly subscriber churn to over 1.5% for the past two quarters is impacting Jio’s net additions, which may deter it from taking tariff hikes in the near term,” brokerage Jefferies said in a note seen by ET.

    Jio added a net 5.2 million users in the quarter compared with 7.3 million in the September quarter and 10 million in the June quarter of FY21. Its monthly churn rate for wireless subscribers rose from a modest 0.46% in the June quarter to 1.69% in the September quarter and 1.63% in October-December.

    Analysts expect Jio to quickly unveil the low-cost Android smartphone with Google to retain and upgrade its JioPhone users as the telco could be susceptible to further churn in the current quarter when 8-10 million JioPhone contracts are scheduled to expire.

    JM Financial said Jio’s net subscriber additions continued to be subdued “due to market share losses in incremental mobile broadband subscribers,” indicating that the telco is acquiring fewer new 4G customers than Bharti Airtel, which has been gaining the bulk of users leaving Vodafone Idea (Vi).

    Untitled-2Agencies

    Jio attributed its low net 4G user additions and higher churn to the continuing impact of Covid-19 and “malicious and motivated campaigns” against the group in some areas, especially in the aftermath of the ongoing farmers’ agitation in Punjab and Haryana.

    Shares of Reliance Industries, Jio’s parent company, declined 5.4% to Rs 1,939.70 at the close on the BSE, while the benchmark Sensex fell 1.1%.

    Jio reported a near 16% on-quarter jump in net profit to Rs 3,291 crore in October-December, helped by strong ARPU growth. Revenue rose to Rs 18,492 crore from Rs 17,481 crore in the previous quarter and Rs 13,968 crore a year ago.

    Jio is still streets ahead of its rivals on the subscriber front, with almost 411 million users at December end, compared with 293.74 million for Airtel and 271 million for Vi at September end. Airtel and Vi are yet to report December quarter earnings. Furthermore, over the past few months, Airtel has been adding more mobile phone users than Jio, according to subscriber data collated by the telecom regulator.

    Analysts are upbeat about the 4% sequential jump in Jio’s average revenue per user (ARPU) to Rs 151, its highest in 12 quarters, saying this was primarily driven by an 8% sequential growth in average wireless data consumption per user per month to about 13 GB.

    However, Axis Capital expects Jio’s quarterly ARPU to decline sequentially in the March quarter with the scrapping of interconnection usage charges from January 1. Till end-December 2020, Jio was a net revenue gainer from IUC, which was 6 paise per call minute.

    Brokerage CLSA said Jio’s 8.1% sequential growth in operating income or ebitda was “in line” as higher-than-expected ARPU growth had helped offset the impact of lower user additions.

    Goldman Sachs expects Jio’s fibre-to-home and enterprise services to drive revenue growth in the near term. The telco’s management told analysts the company is seeing strong traction in its home broadband and enterprise segments, which have scaled up rapidly with services offerings across the country.



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