Reliance Jio gains from incumbents' loss in rural India, says Trai report

Larger rural base to put further pressure on Jio's ARPU

During the January-March quarter, Reliance Jio added almost 16 million rural subscribers, while Bharti Airtel and Vodafone Idea lost around 20 million and 13 million, respectively, according to the Telecom Regulatory Authority of India (Trai) Performance Indicator Report for January-March quarter.

Rural subscribers have witnessed a churn of late — almost 17 million rural subscribers went out of the system, even as 3 million urban subscribers were added over the previous quarter.

This led to a drop in teledensity to 90.11 per cent, with rural slowdown being the driver. Vodafone Idea (40 per cent) and Bharti Airtel (29 per cent) still continue to command a lion’s share of the rural subscriber base, with Jio (22.62 per cent) trailing behind Airtel.

The monthly subscriber growth rate slowed to a negative 1.82 per cent, largely impacted by wireless subscriber loss in March. Almost 16 million rural subscribers and 6 million urban subscribers or users exited the telecom base in the month. Rural decline was much larger — monthly decline rates of urban and rural wireless subscription were 0.93 per cent and 2.99 per cent, respectively.

At the same time, the data shows that rural internet subscriber base jumped by 13.7 million in the fourth quarter (Q4). Analysts say this is the impact of Jio making further inroads into the hinterland as incumbent telcos continue to lose subscribers there.

“The consistent addition in rural subscribers would hurt Jio’s average revenue per user (ARPU). In the April-June quarter, the ARPU is expected to slip by 3 per cent or so sequentially. Its ARPU has been slipping consistently over the past several quarters; it was Rs 134.5 in first quarter of 2018-19, which fell to Rs 126.2 in Q4 of the financial year,” said an analyst.

He further added that around 50 per cent of the new subscriber additions for Jio are JioPhone users. One can easily assume that of the 7-8 million active subscribers Jio is adding every month, at least 3-4 million are on JioPhone.

The ARPU for the growing base of JioPhone users, who join the Rs 501 Monsoon Hungama Plan, works out to Rs 99 per month per user. Anshuman Thakur, head of strategy and planning at Reliance Jio, had pointed out during the firm’s Q4 results that this works out to Rs 86 per consumer per month after the goods and services tax. 

“The average data usage by a JioPhone user is around 8-9 gigabyte (GB) data per month, compared to 10-11 GB per month overall. A larger JioPhone base would thus, drag Jio’s numbers,” said another analyst. 

Morgan Stanley analyst Parag Gupta noted in a recent report that while Airtel ARPU is expected to increase 2.6 per cent over the quarter, Jio ARPU is expected to remain flat, although the subscriber base is expected to cross 330 million. As such the revenue of the sector has been declining.

Gross telecom industry revenue during the quarter dropped by a per cent to Rs 58,414 crore, while adjusted gross revenue fell 0.34 per cent. The monthly ARPU improved for wireless by around 1.8 per cent (to Rs 71.39 in March 2019, from Rs 70.13 in December 2018) as incumbent telcos shed subscribers. On a year-on-year basis, the monthly ARPU dipped 6.12 per cent in the January-March quarter, according to the Trai data.  

“Only seven service areas have more than 50 per cent share of rural subscribers in their total number of subscribers. Bihar service area has maximum share of rural subscribers (65.42 per cent) in its total telephone subscribers,” wrote Trai.

The total internet subscribers jumped 32 million (across rural and urban) during the quarter, largely from 37 million new broadband subscribers.