A sharp rise in expenses, including network expenses, depreciation and amortization (D&A) and staff and selling costs, also dragged down the telecom market leader’s net profit in the July-September quarter. Experts, in fact, expect Joe’s D&A costs to increase over the next few quarters as 5G spectrum amortization begins.
According to analysts, Jio’s per capita data consumption has been strong, growing 6% sequentially last quarter. This, they said, highlighted organic consumption-driven growth that could accelerate after the rollout of 5G, as it aims to boost consumption and support ARPU premiumisation.
“Cost inflation was a negative surprise and limited Jio’s Ebitda margin expansion to 51% (QQ to 90 bps) … network opex also grew 5% sequentially to ₹7,200 crore, especially after a ₹2,000 crore increase in rental payments. H1FY23,” ICICI Securities said. Jio’s network revenue rose 30% year-on-year if it includes lease payments, the report said. The rental value is treated as finance lease as per Ind-AS norms.
ICICI Securities approves ₹70,000 crore equity lead for Jio’s 5G network. According to Goldman Sachs, Joe’s revenue market share (RMS) was 43% mostly sequentially in the September quarter. But the brokerage firm expects its revenue to grow 6% quarter-on-quarter in fiscal 3Q18 as it anticipates a rate hike. IIFL said Jio has “no ARPU tailwinds from 2G to 4G upgrades like Bharti”.
Jio was a pure 4G service provider until the recent beta launch of 5G in five cities. Although Airtel is now primarily a 4G player, it still offers 2G services. Analysts said Jio’s holdings of 700MHz 5G spectrum should give it a deeper domestic coverage advantage and stronger support to crack the high ARPU market, but market performance against Airtel is key. This is because the top two telcos will focus on 5G rollout in 5-10 major cities in the last two quarters of this financial year.
IIFL estimates Jio’s blended (mobile + fibre) quarterly ARPU to grow to ₹180, ₹204 and ₹222 respectively for FY23/24/25. ARPU, a key indicator for telecoms, rose to ₹177.20 in the second fiscal quarter from ₹175.70 in the previous three months.