Reliance Jio has reported revenue of Rs 7,213 cr, including GST, and an operating profit of Rs 261 cr for the second quarter of the financial year.
However, after deducting costs related to the wear and tear of its machines, Reliance Jio reported a pretax loss of 414 cr. This means that on the bottom line, it was still a loss-making concern.
However, the numbers for the quarter suggest that it may no longer be the case as of today and it may be profitable at a net level as well, unlike companies like Idea Cellular.
This is because of the recent cut in interconnect charges.
Interconnect charges amounted to Rs 2139 cr during the three month period, and are likely to decline by about 900 cr in the current quarter due to the IUC cut. The IUC was cut by about 60% with effect from Oct 1.
This would be more than enough to wipe-out the Rs 400-odd crore of pretax loss and push the company into a net profit.
This is surprising, given that investors were expecting the telecom arm to turn profitable only after a couple of years of starting its commercial operations.
Another surprising number in the financial statements was the extremely low level of network expenses shown in the quarter.
Due to the more up-to-date nature of the company’s network and technology, it was expected to post low network costs. However, the actual number has come in well below the usual norm.
For example, Bharti Airtel had a network expense of Rs 3,935 cr for its India operations for the three months from April to June this year. In comparison, Reliance Jio reported network expenses of just Rs 1,372 cr for the three months from July to September.
In other words, the company spent only one-third of what Airtel spent on running its networks in India, despite carrying several times more data on its network.
This is the first quarter of substantial revenue for the telecom operations of Reliance Industries.
Last quarter, digital services — which is what Jio is termed as on the company’s books — were shown as generating a revenue of just 145 cr rupees, and an operating loss of Rs 22 cr.
OPERATING METRICS
The company also revealed operating metrics for the three month period.
Net of GST, the company’s revenue of 6,147 cr gives an ARPU (average revenue) of Rs 156.4 per subscriber per month, which is similar to what rivals like Bharti Airtel and Idea Cellular also report.
An average Reliance Jio user consumed 9.62 GB per month during the period. Average voice consumption was 626 minutes per month during the period, the company said.
Jio claimed an 85% market share in 4G devices in India as of the end of September, and said two thirds of the new 4G smartphones in the country were ending up its network.
“The cumulative LTE smartphone base is estimated to have reached 160 million. Jio has over 85% market share in the LTE smartphone base in the country,” it said.
“During the quarter ended 30th September 2017, it is estimated that around 27 million LTE smartphones were sold in India. On gross add basis, Jio achieved over two-third market share of the incremental smartphones sold in the country,” it added.
Total assets under the digital business has increased to 2.28 lakh cr, up from 2.22 lakh cr three months earlier and 1.48 lakh cr in the year-ago period, indicating slowing investment pace.
Mukesh Ambani, chairman of the company, highlighted the fact that the digital business had reported a profit during the quarter.
“The strong financial results of Jio demonstrates the robust business model of Jio and the significant efficiencies that the Company has built through its investment in the latest 4G technology and right business strategy. As always, the Group has demonstrated excellence in execution, vision and commercial acumen,” he said.
“Reliance Jio.. had a positive EBIT contribution in its first quarter of commercial operations,” he added.
He also said the company is on track to have the highest penetration of any technology by next year.
By 2018, it expects to reach 95% population coverage, greater than 2G coverage of any other operator.
“We are focussed on providing multi-layered digital services on top of the basic connectivity service to optimally utilise our world class infrastructure,” he said.
“The strong financial results of Jio demonstrates the robust business model of Jio and the significant efficiencies that the Company has built through its investment in the latest 4G technology and right business strategy. As always, the Group has demonstrated excellence in execution, vision and commercial acumen.”
Total revenue for Reliance Industries as whole came in at Rs 97,402 cr, up from 92,661 cr three months earlier.