- Over the last one year Reliance
JioAccording to the Jeffries report, the dealer commission bill has increased by a massive 87%.
- As commissions can only grow in the coming years
Jio Fiberplans to increase its customer base from six million to 20 million.
- Despite the increase in its network costs in terms of tower rental and maintenance costs, Jio’s costs are much lower than its peers.
Seven years after launching its services and three years after launching premium Jio Fiber services, Reliance Jio has opened its wallets to its dealers and sales channels.
In the past year, Jeffries reports that its dealer commission bill has increased by a massive 87%, and that momentum is likely to continue next year.
“This is probably due to the continued expansion of home broadband and increased commission intensity. Jio’s dealer commissions at 3.4% of sales are now in line with peers,” the statement said.
However, its largest dealer is Reliance Retail, which has over 12,000 stores across India. The commissions earned by the retailer are ₹2,580 crore in FY22. Its total selling and distribution expenses fell by 6% in FY22 despite a 34% increase in gross subscriber additions.
However, commissions and channel costs are likely to rise as he hopes for a big increase in these connections.
Jio Fiber has a little over six million customers and aims to grow it to 20 million. But these increased fees won’t change the carefully crafted economics of Jio’s operations, as its capital gains and free cash flow will suffer as it buys new 5G spectrum.
The price of the tower, the rent is low
Jio’s network costs also increased by 13% year-on-year due to higher fiber usage charges and higher electricity and fuel costs. Its revenues grew at a faster rate than its costs.
“Given the growing revenue gap booked by Bula and the costs recognized by Reliance Jio Infocomm, these costs are likely to grow at a faster pace in FY23 as well,” Jeffries said.
On most other costs, Jio operates strongly compared to its peers. According to a Jefferies report, Reliance Jio’s average tower rent is 30-40% lower than its competitors.
The repair and maintenance costs of these towers are half of what Airtel and Vodafone Idea pay, and the report says this is due to the new network technologies used by Jio.
In the year under review, fuel prices on Jio’s sites increased by 14%. “This is basically the same for Bharti Airtel and Vodafone Idea. Repair and maintenance costs increased by 57% year-on-year. Even after this increase, Jio’s maintenance and repair costs per site remain 50% lower than its peers, largely due to a much newer network,” the statement said.
This is part of the economics of Jio’s strategy, which allows it to remain the most competitive player in the market despite its recent 5G spectrum purchases at twice what Airtel paid.
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