Billionaire Mukesh Ambani’s telecom venture Reliance Jiowill this year become India’s No.1 telco in terms of both subscriber base andrevenue, brokerages Bernstein and Credit Suisse said in separate reportsTuesday.
Jio, which stormed into the sector in 2016 by offering freevoice calls and dirt cheap data on mobile phones, is reporting net profit and apositive return on invested capital was due to “non-standard depreciationmetrics” and subsidies on selling bundled JioPhones being booked throughReliance Retail, Bernstein said.
“Our high-level attempt to normalise these factorspoints to a potential loss of Rs 15,000 crore in FY2019. Far worse thanBharti’s or Vodafone Idea’s,” it said.
Jio using non-standard depreciation and amortisation hasbeen reported previously as well and the regulators have found nothing wrongwith such a reporting.
Bernstein said it is making this point only to highlightthat Reliance will ultimately want to make a positive return on its investmentwhich will require a reduction in handset subsidies and a boost in subscriberrevenue.
“We expect average revenue per user (ARPUs) toeventually start to rise to enable this,” it said.
Competitors Bharti Airtel and Vodafone-Idea are not beingirrational by not following Jio down the subsidy path.
“Over the next 12 months we expect Jio to reach numberone on both subscriber and service revenue metrics,” it said. “Havingachieved this goal, we question whether they continue to focus on taking share?Or move to the next phase of their strategy emphasizing greater subscribermonetisation?”
It was of the opinion that the possibility of greatermonetisation (ARPU upside) could start in FY20/21.
Vodafone Idea had 387 million subscribers at the end of thethird quarter of current fiscal while Airtel had 284 million. Jio had 280.1million