Reliance Jio beats Street, tariff hike lifts Arpu after three quarters

New Delhi: Reliance Jio Infocomm, the telecom operations of Mukesh Ambani's Reliance Industries, surpassed analyst expectations on multiple fronts—net profit, Ebitda, average revenue per user (Arpu)—as it reported strong numbers in the September quarter.

The company reported a 14.76% quarter-on-quarter (q-o-q) rise in consolidated net profit for the second quarter to ₹6,539 crore. Consolidated revenue from operations rose 7.67% q-o-q to ₹31,709 crore.

In year-on-year (y-o-y) terms, the number one telecom services provider in India clocked 18% revenue growth and 23.4% increase in net profit for the quarter ended September, beating market estimates.

The company’s Ebitda, too, surpassed analyst estimates, rising 17.8% to ₹15,931 crore in the quarter ended September from ₹13,528 crore in the corresponding quarter in FY24. Brokerage Nuvama had expected Ebitda to rise 12% on-year on higher Arpu. Ebitda refers to earnings before interest, tax, depreciation and amortization.

In a media release, Mukesh Ambani, chairman and managing director, Reliance Industries Ltd said, “Growth in digital services was led by increased Arpu and improving customer engagement metrics, reflecting the strong value proposition of our services. The home broadband segment is witnessing accelerated momentum on the back of our unique industry-leading JioAirFiber offering.”

JioAirFiber is the telco’s fixed wireless access service that provides fibre broadband-like speeds without the need of fibre connectivity directly to home premises. The latter is done by JioFiber.

The telecom operator’s Arpu in September was ₹195.1, up 7.4% from ₹181.7 both on-year and sequentially. The carrier's Arpu was flat for three consecutive quarters till June 2024.

BofA Securities had said the September quarter numbers would reflect the benefit of the tariff hike, but for Jio specifically the benefit is expected to be reflected over the next three to four quarters, a trend similar to the previous two tariff hikes, primarily because a larger proportion of Jio users are on one-year packs or have recently topped up recharges. Jio’s revenues were expected to be up by 5% sequentially, led by 6% sequential improvement in Arpu.

Jio said the full impact of the tariff hike will flow through in the next two to three quarters.

“Jio’s broad spectrum of offerings enables it to digitally empower every village, town and city in India as well as the country’s small and medium scale enterprises,” Ambani said in the release. “The digital services business continues to focus on innovative deep-tech solutions on a national scale and is on track to deliver the path-breaking benefits of artificial intelligence to all Indians.”

Jio's total number of customers was 479 million, up 4.2% on-year, including 148 million 5G customers as of September end, the second-largest base of such users after China. However, the company lost 10.9 million customers in the second quarter compared to the first quarter, higher than estimated by BofA, which expected a loss of 4 million subscribers. Emkay Global expected net subscribers to be largely flat sequentially.

However, the telco said the fall in subscribers was lower than what it had seen in the past SIM consolidation events when the tariff hikes had taken place in the previous years.

Jio had captured a wide sweep of India’s telecom market with its highly discounted or even free services in 2016. This June, it undertook a 13-25% tariff hike, which showed in the numbers.

“As data markets continue to expand, Jio’s strategy in 2016 to set up an all-4G network is paying off,” said Mahesh Uppal, director at Delhi-based consultancy Com First India, adding that the company led a steep fall in prices to attract 2G and 3G subscribers to the superior 4G services. “This has given Jio several advantages in the market and has been good for consumers as well as the economy at large,” Uppal said.

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Akash Ambani, chairman of Reliance Jio Infocomm, said in the media release, “Right from inception, Jio has focused on deep tech innovation to create customer and shareholder value. The ongoing transformation created by Jio True5G and JioAirFiber in India’s digital landscape is a testament to this approach. AI is creating the next runway for this transformation, and Jio is committed to developing the world’s best AI ecosystem in India, for all Indians. Jio is committed to delivering robust shareholder returns and has demonstrated strong uplift in financial performance in the current quarter.”

JioBrain, the company’s suite of AI tools and platforms, will be offered to enterprises on a platform-as-a-service basis, Kiran Thomas, president of Jio Platforms Limited, said at a media briefing after the results were announced. JioBrain is being used by the RIL group across several processes and offerings.

It will also introduce the beta version of its AI Cloud for consumers, and commercial plans will follow afterwards. Jio launched the AI Cloud welcome offer earlier in the quarter where users got up to 100GB of free cloud storage to securely store and access photos, videos, documents, digital content, and data, rivalling Google, Microsoft and other cloud storage providers.

Wireless 5G broadband service Jio AirFiber services connected 2.8 million homes in the September quarter. Reliance Jio plans to add 1 million homes every month as it aims to get 100 million connected to JioAirFiber. Distribution would be scaled up and onboarding process would be continuously optimized, the telco said.

Thomas added that the telco was undertaking smart spectrum management, which was leading to efficiency for its own operations but was also leading to reduced power consumption of the handset being used by customers on its network. “From the same handset, but working on our network, you are able to get about 20-40% extended battery life because of the better energy efficiency,” he said.

Reliance Industries Ltd’s telecom entity continues to be the world’s largest telecom operator by data usage, with about 45 exabytes of data being consumed on the telecom operator’s network during the quarter, similar to the consumption in the June quarter, which was 33% higher than last year.

On Monday, Reliance Industries' share price closed 0.11% higher at ₹2,745.20 apiece on BSE. The results were announced after market hours.