Reliance Jio’s Q3 profit too good to believe, says research firm
New Delhi: Reliance Jio Infocomm Ltd posting a net profit in the December quarter, having launched commercial operations only 15 months earlier, is a bit too good to believe, global investment research firm Sanford C. Bernstein and Co. said in a 2 February note.
Jio’s reported profit is due to a unique approach to depreciation and amortization (D&A), which results in a significantly lower D&A expense than seen elsewhere in the industry and applying ‘normal’ depreciation metrics would imply Jio’s net loss would have been Rs2,410 crore in the December quarter, the research firm said.
The latest entrant in the telecom sector, Reliance Jio, reported a profit of Rs504 crore in the quarter, a first for the firm, as it benefited from the telecom regulator’s decision to slash interconnect usage charges—levied by mobile networks for handling incoming calls from rival networks—as more calls originate from its network than terminate.
The Telecom Regulatory Authority of India (Trai) had cut IUC to 6 paise a minute from 14 paise effective 1 October.