New Delhi: Reliance Jio witnessed churn of 22 mn heavy voice subscribers and its ARPUs have not improved despite tariff hikes as most of the subscribers are on the 84-day plan, analyst firm SBI Caps Securities has said, adding that net subscriber adds were muted due to churn of heavy voice users.
Jio's gross subscriber additions continue to be driven by Jio phones. The churn of 22 mn heavy voice subscribers may have led to some adverse revenue impact this quarter.
Contribution from Jio phone continues to trend upwards, as such ARPU improvement was not seen much in this quarter. The improvement on account of December tariff hikes will be meaningfully visible from Q1FY21, SBI Caps Securities said.
Jio's Q3FY20 revenue was up 6 per cent QoQ, net subscriber adds were muted due to churn of heavy voice users because of IUC tariffs and the Key focus area for Jio seems to be driving FTTH and enterprise markets. The ARPU improvement seen early FY21 onwards and no respite to incumbents on AGR issue may drive accelerated market share gains for Jio in the near to medium term, it said.
Jio reported revenue growth of 6 per cent QoQ and EBITDA growth of 8 per cent QoQ. One of the key highlights of the quarter was that Jio lost 22 mn heavy usage smartphone subscribers which resulted in flat ARPUs despite two tariff hikes taken in the quarter.
Further, data consumption per subscriber moderated to 11.1 GB/month (down 5 per cent QoQ) while voice minutes of use (MoU) were reported at 760 mins/user (down 4 per cent QoQ). The company also became a net recipient of IUC revenues this quarter onwards and some of the revenue growth during this quarter is also helped by improvement in traffic mix and IUC revenues.
If it was not for IUC revenues, ARPUs could have seen some marginal decline in this quarter as per our analysis. EBITDA margins were up 70 bps QoQ at 40 per cent. EBIT margins rose 140 bps QoQ to 27.2 per cent while PAT increased 36 per cent QoQ to INR 13.5 bn after recognizing an exceptional charge of INR 1.77 bn (estimated liability of the AGR dues), the analyst firm noted.
With Jio starting to charge for IUC mins, outgoing IUC calls as a percentage of total mins has come down from 62 per cent to 48 per cent in just the December 19 quarter itself. Jio is focusing on transitioning its FTTH test users to commercial plans by offering set top boxes which offer content and drive user engagement along with data usage. The Company believes network utilisation is still low hence it can handle more subscribers with limited capex and existing spectrum.
Q3FY20 capex reported at INR 30 bn (digital capex INR 25 bn) vs. Q2FY20 capex is INR 50 bn. Q4FY20 quarter is showing healthy data consumption trends, and post tariff hikes, there is a shift in some subscribers moving from three month plans to two month plans. For Jio, Gross debt is INR 960 bn, capex for creditors INR 450 bn while outstanding spectrum liabilities are INR 190 bn and interest accrued INR 50 bn, SBI Caps Securities said.
The report said 22 mn subscribers moving from Jio may have accrued to incumbents and we may see some gains particularly in Bharti on account of this in Q3FY20 numbers.
Secondly, the overall impact of tariff hikes is likely to be subdued for incumbents as well in Q3FY20 and on similar lines will be visible for them from FY21 onwards.
Separately, the recent dismissal of the review petition filed by the telcos in the AGR case weakens the visibility on Vodafone Idea's survival but difficult for us to model any subscriber gains for Jio till the time we get complete clarity on this aspect, it pointed out.