Reliance Jio’s September earnings to be driven by aggressive subscriber additions

• Reliance Jio is going from strength to strength and analysts expect it to remain in the subscriber acquisition phase for the foreseeable future.
  
• The Mukesh Ambani-led telco has gained a healthy lead over rival Airtel in terms of active subscribers – a feat that is noteworthy given Airtel’s dogged fightback since the beginning of 2020.
  
• Analysts expect Jio’s aggressive subscriber additions to drive its revenue in the September quarter.
  

Reliance Jio is now the largest telecom company in India in terms of both active as well as total subscribers, finally leaving its rival Airtel behind with a substantial lead. Analysts say this could bolster the Mukesh Ambani-led telco’s September quarter earnings.

“Jio's revenue growth is likely to be entirely driven by subscriber additions,” said IIFL Securities in its research note, while observing that the September quarter will likely be healthy for telecom companies.

“We expect the subscriber addition trend to be mixed for the industry, with industry leader RJio is likely to lead subscriber addition with about 15 million net adds in Q2,” said ICICI Direct Research in its report.


There is hard data to back up the bullish observations of research firms – while the overall telecom industry added a little under 7 million subscribers in total in July and August, Reliance Jio alone added 7.15 million of those.

Jio’s number is higher than the overall telecom industry since Vodafone Idea had a net decline in the number of subscribers at -2.2 million, while Airtel brought in a little over 2 million subscribers.

Jio’s subscriber additions are still less than halfway through ICICI Direct’s estimate, so it will be interesting to see how the numbers play out when the company unveils the September figures on Friday. In comparison, Morgan Stanley estimates this number to be at 14 million.

The recently announced telecom relief package is also likely to delay the tariff hikes, so Reliance Jio’s average revenue per user (ARPU) recovery is likely to remain stunted.

“With the relief package reducing the urgency around tariff hikes, we now build-in significant price increases only in 2H 2022 [second half of 2022] versus early 2022 previously,” IIFL noted in its report.

Reliance Jio is expected to lag Airtel in terms of revenue growth due to the absence of tariff hikes, something that Airtel has recently done in certain segments.

Despite this, the telco is expected to post an EBITDA growth (Earnings Before Interest, Taxes, Depreciation, and Amortisation) of 5-7% when compared to the previous quarter, according to a Jefferies report. Morgan Stanley pegs this number at 5%, with moderate growth in ARPU at 1.5%, or approximately ₹140.

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