Reliance Jio third-largest telecom by revenue market share

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Reliance Jio Infocomm has become India’s third-largest telecom operator by revenue market share, dislodging Kumar Birla-led Idea Cellular and closing in on Vodafone India as its aggressive pricing strategy left rivals struggling.

According to ETTelecom, just 19 months since starting services, Mukesh Ambani-controlled Jio’s revenue market share widened to almost 20 percent as of March end, according to financial data put out by the Telecom Regulatory Authority of India (Trai).

Idea’s RMS slumped to 16.5 percent, while No. 2 Vodafone India’s share increased to 21 percent, just a shade above Jio. Sunil Mittal-led Bharti Airtel took its revenue market share to almost 32 percent, helped in part by its intra-circle roaming pact with Tata Teleservices, whose consumer mobility business the market leader is buying.

Jio’s robust RMS numbers come as Idea and Vodafone India prepare to close their much-awaited merger this month, creating a Rs 63,000 crore revenue entity with some 430 million subscribers. Together, Vodafone and Idea will emerge as the market leader with a 37.5 percent RMS and the biggest user base, followed by Airtel and Jio. ICICI Securities said that Jio is already No. 1or No. 2 in 18 circles and has over 25 percent AGR market share in 15 circles.

Jio, which started operations in September 2016 with a nationwide 4G network, reported an over 18 percent sequential jump in adjusted gross revenue (including national long distance revenue) to Rs 6,300 crore the quarter ended March, while Airtel, Vodafone India and Idea suffered sequential falls of 5.5 percent, 4.8 percent and 8.8 percent on this score to Rs 10,100 crore, Rs 6,700 crore and Rs 5,200 crore, respectively, ICICI Securities said in a note analysing the data collated by Trai, a copy of which was seen by ET.

Naveen Kulkarni, a telecom analyst at Phillip Capital said that given Jio’s strong and sustained RMS growth, it could easily surpass No. 2 carrier Vodafone India (independently) on this metric in the first quarter of FY19.

Sanjesh Jain, a telecom research analyst at ICICI Securities, said Jio’s strong revenue share gains may have been triggered by “Bharti, Vodafone and Idea seeing sequential AGR growth in merely six, five and two circles, respectively, out of the 22 circles in the March quarter.” AGR refers to adjusted gross revenue, which is derived from licensed services.

He added that Jio may have benefitted as Bharti, Vodafone India and Idea’s average revenue per user dipped by over 45 percent on-year in seven, two and eight circles, respectively, with customers likely switching to Jio to make outgoing calls, which are free, and using their older carrier connections to receive incoming calls.

Goldman Sachs said the Trai data showed that “in 16 of the 22 telecom service areas, Jio is now a top 2 operator” in terms of AGR. Trai data, however, showed that the overall industry’s AGR shrank 8.2 percent on-quarter to Rs 31,800 crore.

Goldman Sachs attributed the sequential fall in industry AGR during the March quarter to price cuts in January, reduction in international long distance termination rates and revenue consolidation among large players.

Analysts expect the eroding revenue of Jio’s rivals to stabilise in the first quarter of FY 19, with the tariff environment largely stable over past few months and the rapid conversion of subscribers to the data.

As per ETTelecom report, Goldman Sachs said that Airtel has the ability to defend its market share and boost profit when the tariff environment starts improving, given its strong network footprint and balance sheet.  the recent acquisition of Telenor India, it said, “is likely to contribute an additional 1 percentage point to Bharti’s revenue market share in FY19.

The US brokerage predicts that a 300-400 bps slower revenue growth for Idea vs Bharti over the next couple of years owing to the former’s lower capital expenditure and investment in networks. Brokerage UBS said Bharti, Vodafone, Idea, Jio and the BSNL-MTNL combine collectively accounted for 98.2 percent of industry AGR and 91.1 percent of subscriber market share in the March quarter, implying that the remaining are fringe carriers.

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