Reliance Jio Q3 | Tariff hike improves profitability, subscriber base falls on SIM consolidation

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Reliance Jio beat street estimates on the profitability front in the third quarter while the revenues were in-line with expectations. Revenues for Q3 came in at Rs 19,347 crore against Rs 18,735 crore in the September quarter - an increase of 3.3%.

Net profit was up 2.5% at Rs 3,615 crore versus Rs 3,528 crore logged in the second quarter. The operational performance beat the street expectations with EBITDA margins at 49.2% vs 48% in the last quarter. ARPU jump of 5.6% to Rs 151.60 was a positive surprise aided by tariff hike and subscriber mix.

Jio took a tariff hike of 20% in the quarter across its pre and post-paid plans which led to two important developments - improvement in ARPU and a shift in the subscriber mix to more quality customers.

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Jio management said in the press briefing, “Margins close to 50% is an important milestone and the full upside of tariff hike will reflect in its performance in the next few quarters.”

Jio’s subscriber base has seen a second consecutive quarter of decline due to SIM consolidation. The company said that low-end customers with two SIMs have deactivated during the quarter, a trend seen in the last quarter as well. Jio ended Q3 with a net subscriber base of 421 million which is a decline of 8.5%. In Q2, the subscriber base for the telecom giant fell by 11.1%. Jio witnessed gross additions of 34.6 million subscribers in the quarter gone by.

Jio management said, “Subscriber quality has improved to high usage customer additions. Tariff hike also led to SIM consolidation at low usage subscriber base and also let to a transition to long-term plans for many users.”

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Jio also prepaid Rs 30,791 crore of deferred spectrum liability during Q3 which will lead to an annual cost savings of Rs 1,200 crore, management shared. Reliance Industries which was net debt-free in the second quarter ended Q3 with Rs 2,862 crore of net debt on account of replacing high coupon debt with low-cost foreign bonds which were largely used to prepay spectrum liabilities.

On the 5G thrust, Jio has completed the coverage planning in 1,000 cities and is on trial stage in several cities. Jio shared, “We are preparing to be ready by the time we receive government approvals to roll out 5G services.”

Most analysts are positively surprised with the ARPU jump in Q3 but are keenly watching the continued fall in the subscriber base of Reliance Jio. The company sounded a positive note on the new phase of growth in the telecom sector with tariff hike and the government’s recent decisive steps to uplift the telecom sector.