Reliance Jio EBIT jumps 60% in Q3, operating revenue rises 28.3%

Reliance Jio posted a 60.6 per cent earnings before interest and tax to Rs 3,805 crore, riding on 28.3 per cent jump in the operating revenues, which came in at Rs 13,968 crore. The telco, however, saw 22 million subscribers leave its network thanks to the implementation of interconnect usage charges (IUC) charges.

These were primarily voice customers. This along with the tariff hikes implemented during the quarter (around mid December) and the huge offtake for JioPhones led to a rise in the average revenue per user (ARPU) on a quarter-on-quarter (QoQ) basis to Rs 128.4. On a year-on-year (YoY) basis, however, the ARPU is lower compared to Rs 130 in the corresponding period a year ago. The reported ARPU in the September quarter was Rs 120 and if adjusted for IUC charges it was Rs 127 (on a like-to-like basis).

Jio’s ARPU was slipping for seven consecutive quarters. This was the first improvement after many quarters.

Anshuman Thakur, strategy head for Reliance Jio, said the improvement in ARPU over the previous quarter was due to a combination of things. 

“There was a tariff increase, but that impact was minimal (it was from mid-December) as most consumers are on three month plans. So, many of them are still on previous plans. There was some IUC revenue as well and we also had a very good quarter with JioPhone,” he said.

Jio’s subscriber base as on December 31 was 370 million, which shows a 32.1 per cent YoY growth. The telco added 37 million gross adds during the third quarter of financial year 2019-20, while its net adds stood at 14 million. In the September quarter, the net subscriber addition was 24 million. The rate of net additions was, thus, slowing down.

Thakur said, “We were aware of the implications of IUC tariffs and certain customers would be impacted”. There has been a traffic pattern change after the implementation of IUC — from 38 per cent inbound traffic to 53 per cent at present. Thakur said at the end of the quarter Jio was a net IUC gainer.

IUC basically refers to a charge paid by the call-originating telco to the destination operator. Jio wants the IUC to go (that will help it to lower costs), while incumbent telcos want IUC to stay and they are net revenue gainers from it.

Jio posted a net profit of Rs 1,350 crore, up 62.5 per cent YoY, after exceptional items of Rs 177 crore (on account of adjusted gross revenue or adjusted gross revenue dues) during the quarter.

The telco’s wireless data traffic during the quarter was 12 billion GB, registering a 39.9 per cent YoY growth. Asked if there was any plateau of data consumption, Thakur said, “We are still seeing growth in consumption. The base has become so much larger. On per user basis you may not see such a big number but the growth is still there”. 

Meanwhile, Jio claimed that it was on track to becoming a net debt free company. In October, it had announced the formation of a wholly-owned subsidiary for its digital initiatives Jio Platforms (JPL) with a total capital infusion of Rs 1.73 trillion. Under this arrangement, around Rs 1.08 trillion of Reliance 

Jio’s liabilities will be transferred to Reliance Industries (RIL). 

Thakur explained that the process of debt transfer to RIL is being done through a scheme of arrangement. Jio has filed the scheme with National Company Law Tribunal (NCLT), seeking approval for transfer of identified liabilities to RIL in December 2019. “In September, the debt was Rs 1.04 trillion based on which we had filed the scheme. That has gone up marginally,” Thakur said.

As for its fiber-to-the-home (FTTH) service, Jio already has 1 million consumers and is ramping up.