Home >Industry >Telecom >Q2 Results: What Reliance Jio's seventh consecutive ARPU decline means

NEW DELHI : Reliance Jio Infocomm Ltd, India’s newest and only profitable telecom operator, has witnessed seven consecutive quarters of decline in its average revenue per user even as its net profit surged and more subscribers onboarded its network.

The company posted a net profit of 990 crore in the September quarter, up 45.4% year-on-year, as data consumption rose. Its operating revenue increased 33.7% year on year to 12,354 crore.

Despite the growth in all these metrics, its average revenue per user fell as most of the subscribers added were low-paying users.

ARPU stood at 120 with 355.2 million subscribers of September end as against 122 with 331.3 million subscribers as of June end.

ARPU is the total revenue of the operator divided by the number of users or connections on its network.

A declining ARPU means subscriber additions on the network outpace its growth in revenue. In other words, every incremental user contributes less to the total revenue.

This essentially implies that the quality of Jio’s subscriber base is becoming weaker in terms of paying capacity of the user. Moreover, a declining ARPU for Jio is good for its rivals as it would put pressure on Jio to raise tariffs, as the industry clamours for higher prices.

This also comes at a time when Jio has started charging 6 paise a minute for voice calls, after giving it free for over three years.

Earlier this month, Jio said it “had been compelled most reluctantly and unavoidably" to do this following the decision of the Telecom Regulatory Authority of India (Trai) to review the date for scrapping interconnect usage charge (IUC) from 1 January 2020, which has led to regulatory uncertainty.

However, the silver lining amidst a falling ARPU is that data consumption on the network continues to rise. From 11.4 GB in the June quarter, it rose to 11.7 GB in the September quarter.

At a time when its rivals are weaning away bottom-of-the-pyramid subscribers by launching minimum recharge plans and improving their ARPU, Jio continues to widen its subscriber base by adding low-paying users on its network.

“Incrementally we expect the growth to come more from the mid-to-low end subscribers and in process diluting the overall ARPU," Bank of America Merrill Lynch said in a report dated 16 October.

Comparatively, Airtel’s ARPU rose to 129 in the June quarter from 123 in the preceding three months. Vodafone Idea posted an ARPU of 108 in the June quarter.

Airtel and Vodafone Idea are yet to announce financial results for September quarter.

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