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The March quarter results of Reliance Industries Ltd (RIL) had one bright spot—a pickup in Jio’s net subscriber additions. They rose sharply to 15.2 million in the quarter. Note that this is the best performance in the previous four quarters.

Of course, net subscriber adds are still much lower than the average of around 25 million before the December 2019 tariff hikes.

Even so, the net additions were far higher than the 5.2 million, 7.3 million and 10.8 million net additions in the December, September and June quarters, respectively.

While JioPhones were relaunched with a big splash and helped drive growth, “this also reflects that farmer protests are not having as much of an impact as they did in December and January", said analysts at Jefferies India Pvt. Ltd.

In the March quarter, Jio was also able to contain the churn it experienced in the previous two quarters. Analysts from Ambit Capital Pvt. Ltd pointed out, “This quarter saw the churn decline to around 15 million, which is likely a result of new plans launched for JioPhone. However, this definitely affects the quality of subscriber base." JioPhone users generate far lower average revenue per user (Arpu).

To be sure, the change in the interconnect usage charges regime was expected to cap Jio’s Arpu for the March quarter.

As Jio’s subscriber additions rise, so do the risks for Vodafone Idea
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As Jio’s subscriber additions rise, so do the risks for Vodafone Idea

Even so, Jio’s Arpu fell at a higher-than-expected rate of 8.5% sequentially. Nonetheless, given Jio’s pickup in subscriber additions in the March quarter, it will be interesting to watch how peers Bharti Airtel Ltd and Vodafone Idea Ltd perform when their March quarter numbers are announced.

Recall that Jio’s net adds had lagged those of Airtel’s in the previous two quarters, and the latter is expected to continue doing well.

With both Jio and Airtel doing well in terms of subscriber additions, it means that market share losses may accelerate for Vodafone Idea.

Analysts from Credit Suisse said in a 3 May report: “Incrementally, Vodafone Idea’s challenges are likely to increase with Jio acquiring sizeable spectrum and resuming strong subscriber adds."

Moreover, Jio is looking at launching an affordable smartphone in the coming months and this is expected to support subscriber additions to some extent.

“We believe that Bharti Airtel would also likely respond by launching smartphones in tie-up with handset OEMs and financing partners," said Credit Suisse analysts.

They added, “We believe that Airtel’s balance sheet affords it room to also launch affordable smartphones (in tie-ups). However, Vodafone Idea’s weaker balance sheet, continued market-share loss, as well as higher share of feature phone subs makes it more vulnerable in the event of a disruptive smartphone launch."

Overall, after Jio’s fourth quarter results, many analysts have pushed forward their expectations of price hikes ahead. Of course, to that extent, revenue estimates of telecom companies would have to be pared.

The saving grace for Vodafone Idea is that there are no major immediate debt-related payments due. IIFL Securities Ltd’s analysts said in a report on 3 May,

“Vodafone Idea’s limited urgency for price hikes on account of moratorium on past spectrum instalments in place for FY22 and no large debt repayments or AGR (adjusted gross revenue) payments in 1HFY22 make us defer tariff hike assumptions to end-2021."

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