Q1 FY19: Telecom Companies Continue To Post Losses

Disruptions in the telecom industry with respect to customer acquisition, entrance of new player Reliance Jio and the added capital expenditure on building 4G infrastructure has taken a toll on incumbents. There is a very clear trend. Q1 FY2019 results also indicate a similar trend.

• Bharti Airtel reports ~74% fall in net profit in Q1 FY19
• Rcom narrows Q1 net loss to INR 343 crore
• Vodafone India’s Q1 FY19 posted 31% decline in service revenue
• Reliance Jio Q1 profit rises 20% to INR 612 crore
• Idea cellular saw revenue from operations decline by about 28% to INR 5,889 crore

Reliance Jio and Idea Cellular have posted profits for Q1 FY2019. However, Reliance Jio is the only telecom company to have posted pre-tax profits in Q1 2019. Their press release further indicates some impressive figures. Secondly, Idea Cellular was able to post profits due to the sale of its telecom towers. Further, it was reported that Idea Cellular saw quarter-on-quarter voice minutes growth at the rate of 5.8% and its data volume grow at the rate of 24.5%. However, Idea’s Average Revenue Per User (ARPU) remained under severe strain from competing with rivals with a stronger product offering. While Idea’s reported ARPU was lowest at INR 100, Airtel’s was INR 105 and Jio posted an ARPU of INR 135. Idea’s ARPU has declined even against its own ARPU as posted in Q4 FY2018.

Highlights of Reliance Jio’s Q1 FY19 results

• Reliance Jio crossed 200 million subscribers within 21 months from commencement of services
• Reliance Jio leads the industry in growth in subscriber base to 215.3 million
• The company has also seen healthy customer traction on postpaid offerings
• Data consumption has reached at a record 642 crore GB in Q1; it has been reported at 10.6GB per user per month and is growing rapidly
• The company has seen strong financial performance despite the increasing competitive intensity, including EBITDA growth of 16.8% quarter-on-quarter to INR 3,147 crore in 2018 Q1

Industry analysts have argued if Reliance Jio’s really was profitable and if there wasn’t more to them. While Reliance Jio’s funding needs remain large and have been met largely from borrowings by the company and its parent company. But customer acquisition, data usage and average revenue per user figures lay bare the truth. Given below is a comparison between Reliance Jio and its closest competitor Airtel. Reliance Jio has been fast catching up in terms of its customer base. Reliance Jio also posted a monthly churn rate of a mere 0.3% as compared to Airtel’s rate of 2% on a monthly basis. Last week, yours truly had posted an analysis of TRAI’s report on net wireless subscribers added by telecom companies in May 2018. Reliance Jio had emerged as the company with a positive trend in the addition of net subscribers. Airtel was able to post a positive change in its subscription data only thanks to its acquisition of Telenor’s ~36 million users. Usage data also indicates that Reliance Jio’s data services are more in demand as compared to its competitors.

JioPhone, Reliance’s feature smartphone offering, is also expected to add to these numbers by targeting the vast segment still using feature phones. The ease of use and access to the still premium 4G network at a very low cost is expected to draw in a significant market share. Results for Q2 2018 will shed more light on these figures.