Reliance Jio revenue, subscriber forecasts boosted by brokerages

Analysts are optimistic that Reliance Jio will continue to post strong growth, beat industry average on revenue per user


Morgan Stanley expects Reliance Jio to have a subscriber base of 60 million by the end of 2017-17. Photo: Indranil Bhoumik/Mint
Morgan Stanley expects Reliance Jio to have a subscriber base of 60 million by the end of 2017-17. Photo: Indranil Bhoumik/Mint

New Delhi: Brokers have raised their revenue and subscriber estimates for Reliance Jio Infocomm Ltd, indicating growing confidence in the telecom firm’s ability to continue to grow fast and provide high-quality services.

Mumbai-based brokerage firm Morgan Stanley India Pvt. Ltd said it expects the Mukesh Ambani-promoted Reliance Jio to have a subscriber base of 60 million by the end of 2017-18. It had earlier forecast a subscriber base of 40 million by 2018-19. Morgan Stanley maintained its Arpu (average revenue per user) forecast at Rs300 per month for Reliance Jio in a 1 December report.

Reliance Jio currently has 52 million subscribers and claims it is the fastest growing company (even in comparison to Facebook and WhatsApp) in terms of subscriber additions.

Other brokerages feel similarly.

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Analysts at Motilal Oswal Financial Services Ltd expect Reliance Jio’s Arpu to be at least 20% above that of its peers on account of its ability to offer more at the same price as them (or at an even lower price).

“Given higher-than-expected subscriber addition, we have revised up our RJio subscriber base estimates to 60m and 84m for 2016-17 and 2017-18 with ARPU of Rs200 and Rs218, respectively,” Motilal Oswal said in a report on 2 December. At the time of Jio’s launch, the firm had estimated 30 million subscribers by the end of 2016-17 and 80 million by the end of 2017-18 at an Arpu of Rs216.

Before Reliance Jio’s soft launch, the brokerages had said an Arpu of Rs300 was a lofty task as it was nearly double the industry standard.

On 1 December, Reliance Jio said it was extending its free offer period until 31 March 2017 for all users. It also revised its free data usage cap to 1GB per day from 4GB. The announcement was an attempt by the firm to retain subscribers, as around 67% of Jio customers use the it as their second phone connection or a hotspot.

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The company reported only 8% congestion on its towers due to high data usage and said 80% of its users consume less than 1GB.

Analysts at Goldman Sachs (India) Finance Pvt. Ltd expect Reliance Jio to nearly achieve its target of 100 million by the end of March 2017. However, they forecast only 50 million paid subscribers by March 2018 as they expect customers to stop using the service after the free offer period expires.

Morgan Stanley analysts expect Reliance Jio to garner revenue of $3.3 billion in 2017-18. They also expect the company to post losses of up to $2 billion in the next two years.

Its subscriber base could serve the telco well once it starts charging for its services, another firm said.

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“We expect R-Jio to have 75-80m subscribers by Mar-17, which would give a strong foundation for commercial launch (when R-Jio starts charging for services),” IDFC said in a 1 December note.

To be sure, the speed test done by Mint on the Telecom Regulatory Authority of India’s MySpeed portal on Monday showed Bharti Airtel Ltd ’s 4G service on top in terms at 9.18 Mbps, followed by Vodafone India at 7.26 Mbps and Idea Cellular Ltd at 6.98 Mbps. Reliance Jio recorded a speed of around 6.46 Mbps.

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