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Business News/ Industry / Telecom/  Reliance Jio’s push for interconnect usage fees a boon for Airtel
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Reliance Jio’s push for interconnect usage fees a boon for Airtel

During this quarter, Jio also reported a dip in voice minutes of usage (MOU) and average monthly data usage for the first time
  • The entry-level Jio Phone set has lower processing capacity and smaller recharge value than a smartphone
  • Jio reported a dip in voice minutes of usage and average monthly data usage for the first time in the December quarter.Premium
    Jio reported a dip in voice minutes of usage and average monthly data usage for the first time in the December quarter.

    NEW DELHI : Reliance Jio’s move to introduce interconnect usage charges, or IUC, could end up benefiting rival telecom operator Bharti Airtel because of a perfect storm of several factors coming together, analysts said.

    First, as many as 22.3 million ‘heavy voice users’ left Jio’s network after it introduced an IUC charge of 6 paise per minute on 21 October.

    Second, the Ebitda, or earnings before interest, taxes, depreciation and amortization, gains reported by Jio in the December quarter of FY20 were largely led by the IUC charges. Third, the elimination of millions of smartphone users, in tandem with the addition of Jio Phone users (due to a discounted offer on the Jio’s entry-level device) could put pressure on voice and data usage growth.

    Jio reported a 62.45% year-on-year rise in profit at 1,350 crore for the December quarter, while average revenue per user (Arpu) fell from 130 in the year-ago period to 128.40. The company’s Ebitda increased 38.20% to 5,601 crore in the quarter. And the bulk of the Ebitda gain—a measure of profitability—is likely to have come from net IUC earnings, said analysts.

    “The 22.3 million subscribers moving from Jio may have accrued to incumbents (telecom operators) and we may see some gains particularly in Bharti Airtel on account of this in Q3 FY20 numbers," SBICap analysts said in a note to investors after Jio Q3 results were reported. The numbers for Bharti Airtel and Vodafone Idea are expected in three weeks. “Second, the overall impact of tariff hikes is likely to be subdued for incumbents as well in Q3 FY20 and on similar lines will be visible for them from FY21 onwards," noted SBICap analysts. Bharti Airtel is the likely gainer as the other rival, Vodafone Idea, is struggling on the network and financial side, while trying to lose subscribers to ease the pressure on its network.

    According to analysts from JM Financials, Jio’s Q3 Arpu of 128.4 was up 0.7% sequentially, but without IUC the Arpu would be down 1.8% sequentially to 118 from 120 in Q2.

    “(The fact that growth was flat) was driven by 22.3 million subscriber churn mainly smartphone users (heavy voice users) who stopped recharging after Jio introduced IUC top-ups (from 10th October) followed by a cap on off-network calls while re-launching ‘all-in-one’ packs towards 21 October. In addition, higher Jio Phone additions also helped dilute Arpu," noted an analyst with JM Financials.

    The entry-level Jio Phone set has lower processing capacity and smaller recharge value than a smartphone. With more of these customers coming in, and smartphone users leaving the network, there’s been a sharp decline in heavy voice users.

    During this quarter, Jio also reported a dip in voice minutes of usage (MOU) and average monthly data usage for the first time. Over the immediate next quarter, analysts forecast slower subscriber additions for Jio. During Q3 earnings, the company said a churn in heavy voice users was planned for. “Normally we would let them be on the network for a certain period of time (if they don’t recharge), but in this case, they were heavy voice users so we let them go," said Anshuman Thakur, head, strategy, Jio, during the Q3 results’ announcement.

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    Published: 22 Jan 2020, 11:31 PM IST
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