Home / Companies / Company Results /  Jio Q4: Full impact of tariff hikes, ARPU dilution from Jiophone key concerns

MUMBAI: Reliance Industries Limited (RIL) will see its fiscal 2020 fourth quarter earnings take a hit, especially those of its petrochem and retail business, but the profitability of its telecom venture--Jio--will likely be the least hurt. As the company announces Q4 results later today, Jio's average revenue per user (ARPU) impact over the past quarter will be keenly watched.

Reliance Jio had reported a standalone revenue from operations for the December quarter at 13,986 crore. Subscriber base during the period had touched 37 crore, with net additions of 1.48 crore during the quarter ended December. It had reported an ARPU of 128.4 per month in the quarter.

Telecom operators had hiked tariffs at the fag end of the October-December quarter and the effects of that will play out during January-March and the first quarter of fiscal 2021.

Management commentary on monetising the JioMart deal with Faceboook and its possible impact on Jio will be also keenly awaited, apart from updates on how far the fibre business has been ramped up.

“The (Jio) tariff hike will fully reflect from Q1FY21E as the majority of the subscriber base is on long-tenure plans. Subscriber additions are expected at 20 million compared to 15 million in the last quarter (Q3). The average revenue per user ARPU is estimated to increase 5% QoQ to 134, noted a report by Emkay Research.

Earnings before interest, tax, depreciation and amortization (Ebitda) should see 15% growth sequentially for Jio, while the rise in net profit will likely be restricted due to higher depreciation and interest charges, Emkay said.

Axis Capital, however, expects Jio to report a spike in profit after RIL’s takeover of the operator’s debt.

“We expect jump in Jio’s reported profit as RIL has recently taken over 1.0 trillion debt of Jio after approval from NCLT (move to reduce interest cost for Jio) and Jio has moved to new tax regime," noted the brokerage firm. This is also expected to reduce interest costs reported by Jio.

Management commentary on GigaFiber ramp-up and steps for net debt reduction are likely to be key focus areas after the Q4 results.

Investors and analysts will also expect updates on how far the free extension of telecom services during lockdown will impact the April-June numbers.

The full impact of higher Jiophone additions on low-value plans will also manifest in January-March as the company had announced discounts on the feature phone in Q3. “ We estimate Jio's revenue to increase 4.9% sequentially to 146.7 billion. We model in net adds of 14.2 million in 4Q and ARPU to improve 1% QoQ to 130," said Bank of America Securities in a report.

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